With a terrible start to October in the books, investors may be inclined to “wait it out” before making their next big stock purchase. Undoubtedly, September’s stumble has evolved into a haunting first few days of October. Before you give up on stocks and put any excess capital into Guaranteed Investment Certificates that only seem to get more attractive by the month, it may be wise to re-evaluate the firms on your radar.
Indeed, turbulent times do not last forever. With recession jitters picking up, you may have a shot to pick up a few shares of a market beater at a sizeable discount. It seems like Mr. Market (who’s not known to be accurate in times of panic) is more than willing to discount even the highest-quality merchandise in this market.
In this piece, we’ll check out Brookfield Asset Management (TSX: BAM) and Fairfax Financial Holdings (TSX: FFH), two intriguing plays that look undervalued.
Brookfield Asset Management
Brookfield Asset Management is a firm that many Canadians are likely familiar with. Following last year’s spin-off, though, things have changed. The new Brookfield Asset Management (BAM stock) is the new kid on the block. The stock boasts an impressive dividend yield of around 4% at the time of writing and is focused on the asset management side of the business. As you may know, asset management services allow more cash to be returned to the pockets of investors.
Though it’s been a volatile ride through the year, I think shares of BAM look intriguing at this juncture. At just shy of $43 per share, BAM seems like a high-quality blue chip to consider after the September slump.
The stock is down 12% from its recent September peak and could be headed lower over the shorter term. As shares retreat, the dividend yield will rise accordingly. If it breaches the 4.5% mark, I think shares could prove a must-buy for passive-income investors.
Fairfax Financial Holdings
I’ve been pounding the table on shares of Fairfax Financial Holdings and its top boss in Prem Watsa for quite some time, even during the depths of 2020. Indeed, the stock has skyrocketed since bottoming out in 2020. And though the broader TSX Index has been sagging steadily lower, FFH stock has found a way to hold its own, recently shooting to a new all-time high. If you took profits at any point along the ride up, you’re probably itching to get back in. Even with a hot run, I still think the stock has legs to march even higher, perhaps toward $1,500 per share.
Indeed, Fairfax is a rather unorthodox insurance and holding company. But it’s Watsa’s ability to think independently that’s allowed shares to rise when markets sag. On the flip side, the stock hasn’t always surged when the rest of the market has. Either way, I view the low correlation to markets as a good thing, especially in the face of a recession.
At this juncture, I’d be inclined to buy more as the firm feels the wind to its back, all while recession storm clouds move in on the Canadian economy.
Better buy: FFH or BAM stock?
As bountiful as BAM stock’s yield is, I have to stick with Fairfax as the better bet. It has momentum at its back, and shares still don’t look overvalued in the slightest. Further, I’m a big Prem Watsa fan and his intriguing investment style. In many ways, he deserves the unofficial title of Canada’s Warren Buffett.
