2 Magnificent Canadian Stocks to Buy and Hold for 3-5 Years

Brookfield Asset Management (TSX:BAM) stock and another intriguing high-momentum value play that look like magnificent buys.

| More on:
A solar cell panel generates power in a country mountain landscape.

Source: Getty Images

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.

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fairfax Financial. The Motley Fool recommends Brookfield Asset Management. The Motley Fool has a disclosure policy.

More on Investing

Investing

High-Yield Heavyweight: 1 REIT That Packs a Punch

SmartCentres REIT (TSX:SRU.UN) is a yield king with a long-term growth plan that could benefit from much lower rates!

Read more »

Where to Invest?
Investing

Yes, You Should Buy U.S. Stocks!

I strongly believe that every Canadian investor should overweight U.S. stocks. Here's why.

Read more »

Dice engraved with the words buy and sell
Bank Stocks

TD Bank Stock: Buy, Sell, or Hold Now?

TD is out of favour with bank investors. Is this a contrarian opportunity?

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

How Much to Invest to Get $500 in Dividends Every Month

Are you looking for dividends each and every month? This stock is the right "choice" for you, providing stable passive…

Read more »

HIGH VOLTAGE ELECRICITY TOWERS
Dividend Stocks

Dividend Investors: Top Canadian Utility Stocks For June

Here are three of the top Canadian utilities stocks long-term investors may want to consider as portfolio staples moving forward.

Read more »

data analyze research
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Two stocks paying monthly dividends are excellent options for income-focused investors looking to increase their passive-income streams.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Invest $7,000 in This Dividend Stock for $519 in Passive Income

A $7,000 investment in this top dividend stock could generate over $519 annually in passive income.

Read more »

Group of people network together with connected devices
Tech Stocks

3 Canadian AI Stocks That Are Minting Coin in 2024

AI stocks like Kinaxis Inc (TSX:KXS) are outperforming the TSX.

Read more »