The TSX today remains down by about 7% from 52-week highs as of writing. This provides a great time for investors to grab stocks that are far lower than fair value. But what if you can go even beyond those fair value levels?
Economies tend to go through a recession about once a decade, meaning now may be the only chance for the next decade to pick up strong stocks. Stocks you wish you had picked up when they were so low, and you feared the future of your returns.
But don’t let fear stand in your way. Instead, look to companies that have done well for decades, and have more growth to come. Which is why today, I’m suggesting you pick up Canadian Imperial Bank of Commerce (TSX:CM).
CIBC stock is a solid investment in its own right as one of the Big Six Banks. It has provisions for loan losses, which will certainly help when this economic downturn comes to an end. In the past, you can see that in each recession CIBC stock manages to come out strong the other side. In fact, within a year of hitting 52-week lows, CM stock has surpassed its previous all-time highs.
Also key is that these Canadian banks are not American banks. We are not going to see sudden bankruptcies as witnessed in the states, because there simply isn’t as much competition. That’s why these banks have the funds available to put aside, because they’re not spending enormous amounts of cash on getting more clients.
Instead, north of the border, banks tend to focus on what they’re good at, and support clients in this way. In the case of CIBC, over the years, it has been investing heavily in the Canadian economy. This is what has led to a huge downturn in share price, as the economy isn’t doing so well. However, the bank has also invested in its customer service, which has created a large influx of new clients in the past few years.
Value on value
Now you could certainly see performance like this from the Canadian banks as a whole, so why CIBC stock? There is a lot of value there, to put it simply. Shares currently trade at 11.1 times earnings, and are down 22% in the last year. It now boasts a 6.13% dividend yield, which is currently the highest of the Big Six Banks.
Furthermore, shares recently went through a stock split, so it’s also the cheapest of the Canadian Banks in terms of share price. And while CIBC’s not the largest in terms of market capitalization or assets, it holds about a third of the Canadian population, with about 11 million personal and business accounts.
So with shares down so low, and due to recover in the near future, CIBC stock is certainly a valuable buy on the market today. You can bring in more passive income than you would have a year before, and look forward to a potential upside of 31% to reach 52-week highs as of writing! So definitely consider this stock while it’s down. You’ll have to wait another decade if you don’t.