After a hot start to the year, the Canadian stock market has since returned most of its gains earned in January. The S&P/TSX Composite Index jumped more than 5% in January but is now trading about flat on the year.
A key investing theme in 2022 was volatility. And unfortunately, I don’t think we’ll see that change in 2023. The Bank of Canada may have decided not to increase interest rates during its last announcement, but both interest rates and inflation remain far higher than pre-pandemic levels. There’s still a long road to recovery for investors, which is why I’m banking on more volatility in the short term.
Keeping a long-term mindset
Volatility or not, though, I’m certainly not planning on staying on the sidelines this year. As a long-term investor myself, I’m not overly concerned with the market’s movements on a day-to-day or month-to-month basis. Instead, I’m focused on finding top-quality companies that I’m comfortable with holding for the long term.
With that, I’ve reviewed two top TSX stocks that any long-term investor would be wise to have on their radar. Through thick and thin, these are two companies you can count on.
TSX stock #1: Toronto-Dominion Bank
It may not feel like it, but now could be an incredibly opportunistic time to be investing in Canadian banks. With the recent U.S. bank failures, Canadian bank stocks have unsurprisingly also taken a hit.
However, it’s important to remember that U.S. banks have far different regulations than Canadian banks. I’d argue that much of the recent selloff within the Canadian bank sector can be attributed to short-sighted investors. The Canadian banks managed to weather the 2008 financial crisis far better than U.S. banks and there’s good reason to believe the same will happen this time around.
At a market cap just shy of $150 billion, Toronto-Dominion Bank (TSX: TD) is Canada’s second-largest bank. And with a growing presence in the U.S., TD Bank is well on its way to establishing itself as a leader south of the border, too.
Shares are down about 10% year to date and more than 20% over the past 12 months. As a result, the stock is now trading at a much more attractive valuation.
In addition to a discounted price, the dividend yield has also jumped up with the recent selloff. Passive-income investors can now earn a yield of close to 5% at today’s stock price.
If you’ve had one of the Big Five on your watch list, now is an opportunistic time to pull the trigger.
TSX stock #2: Constellation Software
Long-term investors looking for more of a growth-oriented stock pick should have this market-beating tech stock on their radars.
With Constellation Software (TSX: CSU) up close to 15% year to date, Canadians can’t exactly pick up shares at a discount. However, this is not a growth stock that has gone on sale often over the past decade.
In addition, not many TSX stocks have outperformed this tech stock over the past five- and 10-year periods. Shares are up a market-crushing 180% over the past five years and have returned more than 1,500% over the past decade.
If you’re looking for a dependable market beater, there aren’t many better options than Constellation Software.
