November 2023 has been a great month for buyers of the recent dip. Last week, investors had plenty to be thankful for as stocks continued to surge into U.S. Thanksgiving. Though valuations have become a tad frothy in certain corners of the market (think artificial intelligence-exposed tech plays), there are still pockets of undervaluation. And Canadian investors with an extra $5,000 or so, may wish to put it to work, as the consumer looks to bounce back after a year of headwinds and budget struggles. Even if a recovery is still far off, I’m all about encouraging maximizing time in the markets, not timing the markets!
The real upside in 2024, I believe, could arise from rate cuts and a 180-degree shift in consumer sentiment. Indeed, things have been quite gloomy for a while, with that recession on the radar of many. Indeed, the recession probably should have happened already. If it keeps getting pushed out and some sort of economic recovery ensues before we actually fall into an official recession, stocks as a whole may still be too cheap to pass up. From rate-sensitive utility and telecom stocks to retailers, investors have plenty to pick from as we march into December.
Let’s look at two stocks that may look like great bets, even after a hot November of relief. While the pace of gains from the November rally is likely to slow, those who pick away at the cheapest parts of the market may still have what it takes to score a decent return for the next three years.
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BCE: Time to take an overweight position in the dividend giant while it’s down!
BCE (TSX:BCE) stock is a relatively safe dividend giant that’s a favourite among income-seeking Canadians. The recent downfall of the telecom giant has been quite painful for shareholders. But now is not a good time to be throwing in the towel. Not when their dividend yields are close to the highest they’ve been in years.
Today, BCE stock boasts a commanding 7.2% dividend yield. It’s slightly lower than where it was in early November, thanks in part to the recent 8% surge off recent lows, just shy of $50 per share. That said, there’s still plenty of value, especially if you’re looking to set your future self up with a passive-income portfolio slated to grow consistently over time.
Despite all the negativity and pessimism, I remain upbeat about BCE’s recovery prospects, especially if a recession keeps getting delayed until we ultimately forget about it. At the end of the day, there are a lot of newcomers in Canada who will be in need of a solid wireless plan. This bodes well for telecom behemoth BCE as well as its peers. Given this tailwind and the possibility of lower rates in the next year, I think BCE stock could easily be back $65-70 per share sooner rather than later.
Canadian Western Bank: The best bank for your buck?
Canadian Western Bank (TSX:CWB) is a regional bank with a modest $2.8 billion market cap. Despite its small size (relative to the Big Six), I view deep value to be had in the name as it attempts to continue its rally off the lows put in late last year.
At 8.7 times trailing price to earnings, with a 4.6% dividend yield, CWB stock is definitely worth a look if you’re looking for a bargain beyond Canada’s Big Six banking behemoths. The stock is down more than 30% from its high and could be inching higher, as Canada’s west coast looks to bounce back, perhaps on the back of nationwide recovery.
