Canadian investors should treat last week’s pullback as an opportunity to snag shares of their favourite companies on sale. Undoubtedly, not everything that takes a big hit is a great value. Sometimes, pullbacks are more than warranted, especially if the longer-term fundamentals are decaying.
In this piece, we’ll check out two Canadian stocks that are still on the right track from a long-term perspective. Of course, nearer-term headwinds such as an economic recession could take a huge bite out of profits from coming quarters. Beyond the nearer-term woes, though, I do think there’s a pathway toward higher highs. And if you’re a patient investor with a long enough time horizon (10-plus years), the market’s current funk is a good thing!
Without further ado, let’s have a closer look at shares of Fairfax Financial Holdings (TSX: FFH) and Onex (TSX: ONEX), which stand out as compelling value plays that could have room to run into the new year.
Fairfax Financial Holdings
It’s been a magnificent run for shares of Fairfax. Those who gave up on its CEO Prem Watsa (a man who’s also known by some as Canada’s own Warren Buffett) are likely kicking themselves, as FFH stock looks to push to new all-time highs. At writing, the stock goes for $1,159 and change after a remarkable 44% surge year to date. Since the lows of October, FFH stock has been red-hot. And if you took profits at any point up until now, you’ve been watching continued gains from the sidelines.
Although shares have more than tripled from the 2020 lows, I still think there’s room to run. The stock trades at less than nine times trailing price-to-earnings (P/E). I view that as absurd for a company whose fundamentals are seemingly getting better over time. For an insurer, underwriting is a big deal. As underwriting profitability improves while the firm continues to benefit from smart investments, I think $1,300 could be a realistic target for 2024.
Prem Watsa has proved the doubters wrong in a massive way! If you missed the run, though, I don’t think it’s too late. The stock’s sitting at a new high, while the rest of the market is in a bit of a funk. As markets zag, look for FFH stock to zig higher!
Onex
Up next, we have an investment manager that doesn’t get all that much attention from the talking heads on television. Sure, the firm has a market cap of a mere $6.4 billion. However, it owns some truly wonderful, well-known businesses, including Westjet Airlines.
Though it’s shares aren’t at new heights like those of Fairfax, the recent move is remarkable. The stock is up over 35% since its May 2023 lows. At 0.6 times price-to-book (P/B), I think there’s plenty of upside potential as we wander into 2024 with modest expectations.
A big name in the investment world David Einhorn recently picked up a few shares in the second quarter. Einhorn’s firm, Greenlight Capital, believes the management team recognizes the magnitude of the undervaluation and has been buying back stock in response. I think Einhorn is a brilliant investor whom Canadians would be wise to follow. Onex stock is cheap, and it could surge more than 50% and remain cheap, in my opinion.
