The U.S. markets took a step backward on Wednesday following an anxiety-inducing Federal Reserve (Fed) rate hike. As predicted, the Fed raised by 25 basis points (bps) alongside some rather dovish commentary.
Despite noting that rate hikes are nearing the end, stocks still spilled rapidly in the last hour of trade. Undoubtedly, there will always be something to worry about, as market participants continue to digest the latest minutes.
As the latest hike leaves a sour taste in the mouths of U.S. investors, I’d argue that now is a great time to consider some of the bargains on the TSX Index. The Canadian stock markets really outshined major U.S. averages last year. As rate-hike fears and U.S. banking sore spots continue to weigh heavily on the minds of investors, a strong case could be made for taking advantage of the strong greenback by heading north for one’s next stock purchase.
U.S. investors: The Canadian banks may be better buys right here
In prior pieces, I’d noted that U.S. investors could stretch their dollar that much further, with the favourable exchange rate and the lower price-to-earnings (P/E) multiples to be had in various Canadian stocks. Call it “doubling down” on value, if you will.
In this piece, we’ll look at one Canadian bank stock that is beaten down, despite having less vulnerability compared to some of the regional banks down south.
Indeed, the blow-up of various U.S. regionals has hurt the mega-caps. And Canadian banks have also felt the rumbles, despite their impressive liquidity and exceptional track records of managing through turbulent economic times.
Without further ado, let’s look at two Canadian bank stocks that investors may wish to watch closely, as they finally calm down after the U.S. banking storm sent them nosediving.
TD Bank
First up, we have a Canadian bank that does a lot of business in the U.S. retail market. TD Bank (TSX:TD) is a Big Six Canadian bank, but also one that many Americans are familiar with. It’s TD’s American presence that’s made it a relative laggard in the Canadian bank scene in recent weeks. Undoubtedly, U.S. banks are the source of pain. And Canadian banks with lots of exposure have been sent to the penalty box.
Yes, TD is one of Canada’s most American banks. However, it’s no regional bank, and it’s certainly not a bank that’s overly exposed to jittery Silicon Valley startups. Still, TD has endured far more damage than its domestically focused peers. I think Mr. Market is getting TD completely wrong with shares going for $78 and change per share.
TD’s First Horizons proposed deal (which would have beefed up the bank’s U.S. exposure) faces uncertainty. I think TD should negotiate better terms or simply walk away from the deal, given how much cheaper U.S. regionals have become.
The Foolish bottom line
Personally, I think TD shouldn’t have fallen amid the U.S. banking plunge. At the end of the day, TD can get a better bang for its buck, as it explores new options in the U.S. regional banking scene. At 9.35 times trailing price to earnings, with a nearly 5% yield, TD is a wonderful option for your portfolio.
