“Which stocks would you buy if you could buy just three?”
This is a useful question to ask yourself. Although it’s probably not prudent to hold only three stocks — at least not without a major information edge — it is wise to try and understand your holdings well. In this sense, pondering which of your stocks you’d keep and which you would sell if you were constrained to just three can be a good use of your time. In this article, I will do just that, sharing the three stocks I’d buy if I could buy just three.
TD Bank
Toronto-Dominion Bank (TSX: TD) is one beaten-down bank stock I’ve been eagerly buying up lately. It is not, however, a stock that I would actively recommend to others — it is a “cheap” stock that got cheap for reason.
Basically, what happened was the company got caught up in a U.S. Department of Justice (DoJ) money laundering investigation and plummeted when details about the investigation became clear. Although investors knew about TD’s improprieties for some time, The Wall Street Journal put out a story on Friday that shed some very unflattering light on the matters being probed by the DoJ. First, it came out that the investigation centred on two branches, not just one, as was initially believed. Second, the alleged laundered funds related to a major drug trafficking investigation.
Certainly, an investment in TD Bank is not for everyone right now. If it turns out that C-Suite executives were involved in a way that goes beyond just lacking proper controls, then the company has a severe ethics problem. It certainly wouldn’t be suitable for an ESG (environmental, social, and governance) investor in that scenario. For me personally, though, the bank’s newfound cheapness is very intriguing. It is now below 10 times earnings. Investors with more risk tolerance and lower living expenses than average might do well to consider an investment in TD.
Alphabet/Google
Alphabet (NASDAQ: GOOG), better known as Google, is a U.S. tech company you’re probably familiar with. As the parent company of Google, YouTube, and Google Cloud, Alphabet owns several of the most valuable tech properties in the world.
Despite this enormous advantage, the company is relatively cheap by the standards of Magnificent Seven tech stocks. It trades at 26 times earnings, which certainly isn’t dirt cheap, but is cheaper than average for the NASDAQ-100 index (the index that most of America’s big tech companies trade on). A stock being the cheapest of its peer group doesn’t necessarily make it a buy, but Google’s earnings grew by 61.5% last quarter — 26 times earnings is not crazy for a company doing such growth.
Brookfield
Last but not least, we have Brookfield Corp (TSX: BN). This is a Canadian financial services company involved in insurance, asset management and real estate. Its stock has been rallying this year in anticipation of its upcoming earnings, which come out Thursday. Last week, Brookfield’s renewable subsidiary announced that it had signed the biggest clean energy deal in history with Microsoft. The deal will see Brookfield Renewable Partners supplying Microsoft with 10.5 gigawatts of power. That deal will probably have a big impact on Brookfield’s results in the year ahead.
