The Canadian bank stocks were cheap even before they reported their latest round of quarterly earnings results. Undoubtedly, some of the big banks fumbled on earnings, sinking lower following the release of some numbers that failed to impress the crowd on Bay and Wall Street. Indeed, coming quarters may not be too upbeat either as provisions for credit losses (PCLs) become the talk of the town.
There’s no easy way out for the banks. They just need to push through the tough times en route to a (hopefully) better economic climate. The good news is that each one of the Big Six Canadian bank stocks will make it through a potential recession without having to take too large a hit to the chin. If anything, most of the damage may have already been dealt with last year.
In this piece, we’ll check out two Canadian bank stocks that I believe provide some compelling value at current levels. Of course, they may not be destined for massive gains anytime soon, but I view them as a prudent way to collect juicy dividends (and steady gains) over the next five to eight years. Indeed, that’s a lengthy timeframe, perhaps too lengthy for those of us who’ve been conditioned to expect huge gains on a day-to-day or week-to-week basis, with the hottest artificial intelligence (AI) stocks heating up in the tech scene!
The case for buying bank stock over hot tech plays today
As speculative activity in this market soars, I’d argue it’s far smarter to take a step back and consider some of the market’s least-loved stocks for a shot at greater value. Either way, today’s cheap Canadian bank stocks appear to be less dangerous than the high-flying AI tech plays south of the border, some of which have doubled up many times over in just a matter of months.
Chasing the heat is not a game that I nor value investors wish to play. Though it may hurt to own banks over AI chip stocks today, I’d argue that it’s a far less risky way to build wealth gradually over time.
Without further ado, here are two stocks that I’d be willing to bet will do well over the next five years, perhaps better than the top AI chip stocks that may have already priced in many, many years’ worth of growth at today’s lofty valuations. As an investor, overpaying for a stock is always a risk. So, why not improve your chances of underpaying with the following bank stocks?
Today, I’m a fan of National Bank of Canada (TSX: NA) stock at this juncture.
National Bank of Canada
National Bank of Canada has been surging high of late, with the bank on the cusp of a breakout to greater heights. Indeed, it’s a smaller bank with a $36.1 billion market cap, but it’s leading the charge. And I think the bank deserves the attention of investors as management continues to outperform.
With a 4% dividend yield and an 11.23 times trailing price-to-earnings multiple, NA stock looks like one of the best bank plays to stash in a Tax-Free Savings Account for years.
My take? I think NA stock could test the $120 per share level by year’s end and perhaps steer clear of the damage that’ll accompany the next market correction, which, I think, is likely to be driven by a blow-up in the tech scene.
