1 Beaten-Down Stock That Could Be the Best Bet in the TSX

Bank of Montreal (TSX:BMO) stock is an intriguing dividend play for investors playing the long-term game.

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The TSX Index is finally having a moment to shine versus the likes of its American counterparts (notably the S&P 500 and Dow Jones Industrial Average). Undoubtedly, it’s the technology sector that’s been rocked heavily over the past week.

Indeed, the tech trade was overheated going into the month. And though a correction in the sector is not going to be pleasant, especially for those investors who piled into the red-hot tech trade in the first half of the year, I view such a plunge as a fantastic thing for younger investors, even those who may dread seeing red in their portfolios on any given day.

So, why is a big market correction good, especially for younger investors?

A dip not only fans the overheated names, preventing a nastier crash at some point down the road, but it also grants smaller retail investors chances to buy the dip. Indeed, for those young folks who are 100% invested, you want markets to trend lower so that you’ll have better value options once it’s finally payday!

Volatile sector rotations and corrections could be an opportunity

Even for those with a good amount of dry powder on the sidelines, a correction is like having a seasonal sale.

You’re getting many great deals, and if you have the cash to buy, you can walk away with ample savings. Indeed, most people don’t view a sector correction as a sale but more as a red flag. As a new investor, it can pay to be contrarian, but it can be tough to stand up as a buyer when you hear non-stop negativity about a name that many others around you may be more than willing to part with for a fraction of its true worth.

Excessive levels of market volatility can often cause some to think irrationally. In any case, this piece will have a look at one battered stock that I view as a great long-term way to put the TSX Index to shame over the next 18 months. Though it’s a timely play today, in my humble opinion, I view the name as best kept for many years at a time.

Bank of Montreal stock: A value gem with a 5.2% dividend yield

Consider shares of Bank of Montreal (TSX:BMO), which is starting to show signs of life again, rising nearly 5% from its July lows after experiencing extreme turbulence for most of the past year. Even after the nice upward surge, shares of BMO are still down close to 22%. Though a continuation of this summer growth-to-value rotation could benefit the big bank stocks in a big way, investors may wish to consider nibbling incrementally over time.

Undoubtedly, it’s not just a rotation to the forgotten value names that could benefit BMO and the broader basket of beaten-down Canadian bank stocks. More rate cuts from the Bank of Canada and a “soft landing” for the Canadian economy could spell good things for BMO stock as it looks to sustain some a rally in this third quarter.

With a yield north of 5% and a reasonable 14.32 times trailing price-to-earnings ratio, perhaps it’s time to stash the unloved bank back on your radar.

Created with Highcharts 11.4.3Bank Of Montreal PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

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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 positions in Bank Of Montreal. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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