TFSA investors who haven’t yet put their 2023 contribution ($6,500) to work may be wondering if valuations have gotten away. Indeed, the stock market rally has been quite robust so far this year, even with U.S. regional banks causing the broader basket of Canadian bank stocks to wobble a bit. And let’s not forget that we’re due for an economic recession later this year, at least according to a handful of pundits. Recession can be a scary word. But as Canada moves through one, there’s a chance that the actual events which unfold will not be as bad as expected.
Currently, stocks are pricing in some sort of economic disturbance. You could argue that the disturbance is already here, with corporate earnings feeling a bit of the headwinds. Nevertheless, this earnings season has still managed to impress. That’s what can happen if expectations are a tad too low. Stocks can still find the means to move higher, even if earnings or revenue growth slows slightly year over year.
Indeed, sometimes anticipation can be worse than a dreaded event.
Looking ahead, new TFSA investors may wish to consider dipping a toe into the cheaper corners of the stock market. Despite the recent rally off last year’s lows, there are still opportunities. Investors just need to get more selective and do more digging so that they can unearth deals that imply a decent margin of safety.
Value investors are always hungry for good deals, even when they’re just a tad harder to come by. In this piece, we’ll consider two Canadian stocks that I’m confident to keep on buying going into year’s end. Both names have been hot lately, but if they dip, I’ll be ready to add to my position.
Without further ado, let’s get into the names: enter Restaurant Brands International (TSX: QSR) and TD Bank (TSX: TD).
Restaurant Brands International
Restaurant Brands International is a fast-food company that’s on the fast track to $100 per share. The stock is up over 51% in the past year. Strength in Burger King and other brands is helping the firm move higher. Recently, Tim Hortons inked a deal to open locations in the South Korean market. I think the move could be a big deal, perhaps bigger than the market is currently baking in. Tim Hortons isn’t just a Canadian brand, it’s one that could garner significant appeal in international markets.
Only time will tell what the Tim Hortons expansion will yield. Regardless, I’m a fan of the move and shares at these levels. The stock trades at 22.7 times trailing price-to-earnings, which is not high for the brands you’ll get exposure to. Finally, the 3.04% yield is a great addition to any TFSA fund.
TD Bank
There’s no sugar-coating it. The last several months have been pretty scary for TD Bank shareholders. The regional banking crisis south of the border has hurt TD Bank more than its peers.
The bank’s U.S. exposure (TD’s also known as America’s most convenient bank) has worked against it amid its latest bear market moment. Still, I think the whole situation is blown out of proportion. TD Bank is leagues above the U.S. regionals that are under pressure. Not only that, TD has wonderful managers who know how to balance risks.
CEO Bharat Masrani boldly walked away from its pursuit of First Horizons Bank (NYSE: FHN), a move that’s being applauded by many investors. With that deal off the table, short-sellers may have less of a reason to stick around. Only time will tell when they move on to another short opportunity. Regardless, I’d much rather be a buyer than a short-seller of the TSX dividend stud.
More recently, TD Bank launched a slate of new offerings, including a credit card named TD Clear that has zero interest. That’s an intriguing, simple new product that demonstrates TD’s willingness to be innovative.
The stock trades at 9.9 times trailing price-to-earnings and has been under a bit of pressure following a recent analyst downgrade.
