My Top Value Pick for May 2023

Quebecor (TSX:QBR.B) stock is a great income pick for TFSA investors looking for lowly correlated gains in 2023 and beyond.

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It’s a tough market to invest in these days, with valuations, on average, slightly higher than they were a year ago, while the same slate of risks is weighing. Indeed, central banks are now closer to ending their rate hikes.

However, with the focus set on when the rate pause will begin and when the cuts will be considered, it seems like the markets are at a bit of a crossroads. There’s a bit of hope in markets nowadays, but whether such hope is overdone is the million-dollar question. As earnings season comes rolling around, broader stock markets are sure to be volatile in both directions.

At this juncture, new investors shouldn’t be too bullish or bearish either way. Instead, they should recognize the risks and potential unknowns that could lie ahead and insist on stocks that are reasonably priced.

Now, it’s not always easy to uncover stocks that have wide margins of safety. With experience and enough due diligence, though, I believe that investors can “stock pick” in this market such that they’ll be able to better “roll with the punches” that the markets could continue to throw their way through the year. By being able to dodge and weave past the big market swings, investors can navigate their Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios, even through the most hostile of environments.

Quebecor: A telecom underdog that could challenge the Big Three

In this piece, we’ll have a look at one intriguing value pick that I think the market may be sleeping on. Quebecor (TSX:QBR.B) is a Quebec-based telecom that could be on the cusp of a big splash, as it looks to become a competitor to the Big Three Canadian telecoms.

Of course, going against the incumbents will not be an easy task, especially with the costs of borrowing as high as they are, and the amount of ground that Quebecor will need to cover if they’re to catch up to the likes of the Big Three at the national level.

Despite the setbacks and hurdles, I think Quebecor has two key advantages it can leverage to pull forward in its ambitious push to become the fourth major wireless carrier in Canada.

Quebecor has a wonderful management team. They’ve done a remarkable job of offering quality service across the province of Quebec. Further, the brand seems to be preferred among Quebecois for its local roots. As management looks to move outside of Quebec, it will not be able to enjoy the same magnitude of brand strength. However, management could have other intriguing moves up its sleeves. The company wants to be competitive on price. It’s made that loud and clear.

With so many Canadians fed up with the lack of options, I think Quebecor and its brand will immediately have a slight edge, as it looks to take on the role of one of the “good guys” in telecom, seeking to offer users a better value for money.

Freedom and Quebecor could be a match in heaven

With Freedom Mobile falling into Quebecor’s hands, it will be interesting to see what Quebecor chief executive officer Pierre Karl Peladeau does to pressure its rivals on price.

Whether Peladeau and company can apply the “secret sauce” that’s made Quebecor a success in Quebec at the national level remains to be seen. Regardless, I think Quebecor stock’s ambitions are not fully reflected in today’s share price. At 13.59 times trailing price to earnings and with a 3.44% yield, QBR.B stock looks like an enticing way to help power your TFSA or RRSP forward in a rough year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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