It’s not just the U.S. stock market that has the hottest plays out there. While most of the artificial intelligence (AI) tech plays are trading on the U.S. exchanges (the Nasdaq), one should not ignore the TSX Index and the many high-momentum plays on this side of the border. Undoubtedly, the TSX is heavy in the financials and energy plays, many of which are not known for their incredible momentum, at least of late.
In any case, other corners of the TSX Index are worth looking into if you seek the perfect combination of share price momentum, value, and growth. And in this piece, we’ll consider one homegrown stock that’s been going parabolic lately. Undoubtedly, chasing parabolic moves is never a good idea. However, if the valuation still makes sense and there are fundamentally sound reasons behind such upward moves, investors may wish to punch their ticket.
Personally, I’m an advocate for dollar-cost averaging when it comes to the momentum plays. That way, you’ll be able to pick up more shares (thus lowering your cost basis) on any steep pullbacks that could be in the cards. When it comes to the high flyers, what goes up can come down in a hurry! As such, it’s important to have a long-term game plan when it comes to such plays.
Fairfax Financial Holdings: A magnificent stock in the Canadian market
Without further ado, enter Fairfax Financial Holdings (TSX:FFH), a superb financial that’s left the rest of the sector behind in recent years. The insurance and investment holding firm is run by Canada’s version of Warren Buffett: Prem Watsa.
Shares of FFH have been moving steadily higher since bottoming way back in 2020. More recently, however, the momentum has begun to pick up pace, with the stock posting around 19% since mid-December. In just a month and a half, such gains are undoubtedly enviable. For the past year, shares are up 60%. And going into 2024, I’d look for Fairfax to keep marching higher as it continues to impress Wall and Bay Street with sustainable improvements, most notably in underwriting.
Of course, intelligent investments could continue to do more of the heavy lifting for Fairfax over the coming quarters, especially if the Canadian stock market is ready to move on to new heights after grappling with a potential recession.
Fairfax stock looks absurdly cheap, even after going parabolic!
The best part of the Fairfax story is shares are still cheap — actually, they’re stupidly cheap — at 8.4 times trailing price to earnings. If you prefer to look at a forward price-to-earnings figure, shares look even more affordable at 7.46 times forward price to earnings.
So, why is the stock still cheap, despite rallying at a scorching pace in recent quarters?
Part of it has to do with the Prem Watsa factor. He’s known as the Canadian Buffett for a reason. He’s an incredible manager who could help take FFH stock to $2,000 per share within the next two or three years. Though a pullback is always possible (it’s hard to know if one is waiting around the corner), I view the stock as one to average over the next few years if you’re a fan of the firm and Mr. Watsa.
