Forget about the so-called Magnificent Seven companies (some of America’s largest tech high-flyers) for a moment. With less than impressive exchange rates for Canadians looking to swap their loonies for U.S. dollars, it can make more sense to consider some of the TSX stocks that are every bit as magnificent in their own ways. Of course, the TSX Index is lacking on the technology front. But that doesn’t mean there aren’t capable earnings growers that can help enrich investors over a few years or decades.
In this piece, we’ll concentrate on two magnificent Canadian stocks for long-term investors looking to hold for the next three to five years – a rather lengthy time horizon that’s not at all unrealistic for most.
Source: Getty Images
Fairfax Financial Holdings
Fairfax Financial Holdings‘ (TSX:FFH) recent share price performance shows why it’s never a good idea to bet against Prem Watsa, the “Canadian Warren Buffett” who runs the show over at Fairfax.
Indeed, like fellow value investor Buffett, Mr. Watsa does not boast a flawless track record. It’s not hard to imagine how many investors had lost faith in his abilities (and FFH stock) in the early days of the pandemic.
Over extended lengths (that’s the timeframe that matters, folks!), the results speak for themselves. As a true value investor, Watsa is patient enough to wait until Mr. Market realizes he’s made a mistake with his pricing on a certain stock! Not many have the patience or temperament to do this! It’s Mr. Watsa’s deep-value mindset that should have investors wanting to hang onto FFH for decades at a time.
After more than doubling in the past two years, shares have eclipsed $1,500 per share. FFH stock certainly looks and feels expensive as we approach summer. But the talented insurer actually stands out to me as more of a value play, perhaps even a deep-value play at 7.2 times trailing price-to-earnings (P/E).
Personally, I think it’s too soon in the rally to be taking profits. Until Fairfax shows some subtle weakness to its underwriting track record or the multiple expands markedly from current levels, FFH stock stands out as a name to hold. And if you lack skin in the game, I don’t think it’s too late to hop aboard today, even if shares seem long overdue for a pullback or period of consolidation.
If the valuation makes sense and the fundamentals have improved considerably, profit-taking may be ill-advised unless, of course, you’re a near-term trader.
Brookfield Asset Management
Brookfield Asset Management (TSX:BAM) is another magnificent financial firm that’s exceptionally well-run. At writing, shares of the alternative asset manager boast a commanding 3.9% dividend yield after flatlining on a year-to-date basis. The stock seems somewhat pricy at a 32.2 times forward P/E. That said, given the pace of smart deals and the Brookfield name, which has a great deal of trust associated with it, I’d be more than willing to pick up shares here, even if there is a lack of timely catalysts ahead.
At the end of the day, BAM stock is one of those high-quality passive income plays you can set for your TFSA (Tax-Free Savings Account) or RRSP (Registered Retirement Savings Plan) and completely forget about. Personally, I’m waiting for a pullback closer to the $35 per share level, though I’d not be afraid to nibble into a starter position starting in June if you’re keen on the name and have a bit of extra cash sitting in savings and would rather have it put to work in one of the market’s premier alternative asset management plays.
