You don’t need a lot of capital to start investing in stocks. Many well-known investment gurus suggest that if you have a long investment horizon, you should invest regularly and as soon as you have cash available. Why? The sooner you let the power of compounding interest work, the faster your money can snowball over time.
Stock commissions have come down to such an extent that buying and selling any stock is very affordable. Buy an undervalued, high-quality stock and a $1,000 investment can start to grow into something substantial over time. There are always bargains in the stock market, and here are three TSX stocks that look relatively cheap right now.
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A cheap TSX stock for passive income
Toronto-Dominion Bank (TSX: TD) stock has fallen 8% in the past three months. Recently, market commentators have noted that it is one of the most shorted bank stocks in North America. One could suggest that sentiment has become very poor for TD ever since the collapse of Silicon Valley Bank a month ago.
Fortunately, Canadian banks must meet significantly higher standards for managing their balance sheet/capital than their American peers. TD is Canada’s second-largest bank. Yes, it has significant exposure to the United States. Yes, it is buying First Horizon Bank at what appears to be a significant premium.
One needs to be comfortable with some of these near-term risks, as it could present long-term opportunities. TD stock trades with a price-to-earnings (P/E) ratio of 8.9 times. That is a near five-year low valuation.
Its dividend yield of 4.5% is also at its highest since the March 2020 market crash. Banks are complicated stocks, but if you are looking for something large and cheap, TD could be a good bet for a contrarian investor.
A value-priced retail stock
Another stock for a long-term contrarian is BRP (TSX: DOO). It is one of the largest manufacturers of snowmobiles, ATVs, boats, jet-skis, and three-wheelers in the world. It has iconic brands like Ski-Doo and Sea-Doo that set it apart.
Many are worried that discretionary items like recreational vehicles will be victim to a potential recessionary environment. While this is a concern that is likely reflected in the stock, the company has a broader line-up of products than ever before. It continues to innovate new categories that have gained industry acclaim.
It has navigated through past recessions and still delivered a +15% compounded annual average return. Today, you can buy this stock with a P/E of eight, which is still a discount to its peers (which, it has outperformed in many categories). If you can look past the recession, this looks to be an attractive opportunity.
A top real estate firm
Another stock that looks to be an incredible value find is Colliers International Group (TSX: CIGI). It is a global commercial real estate broker, but it also has a diverse portfolio of real estate and investment services businesses. The stock has pulled back 15% over the past year.
Real estate activity has pulled back as interest rates have drastically risen. There are some signs that rate increases have paused. Some believe rates could even come down. If that is the case, Colliers enjoy a fast recovery in real estate activity.
The company has a great track record of delivering around 15% average annual total returns. Yet it trades at a discount to its growth rate at only 13 times earnings. The company has a great management team, strong balance sheet, and many levers for growth by mergers and acquisitions. For a long-term bet, it looks to be an attractive deal today.
