September never really was a month for stock investors to get excited about. Indeed, it’s always sad to think that the summer is coming to an end. Aside from that, some pretty ugly action for stocks began in September. Just because September doesn’t have a good rep does not mean you should sell now with the intention of getting back in come October, November, or December ahead of the so-called seasonal Santa Claus rally.
Just as Santa rallies don’t come to town every year, a September swing lower may not be in the cards, either, especially since the stock market already took a dive back in July and August. While it’s smart to be cautious or cautiously optimistic, it’s important to remember that it’s the next 15-30 years that counts most, not the next 15-30 days!
With that, this piece will check in with two Canadian stocks that make for great long-term holds but can also make it through a highly uncertain time of the year for investors who are still rattled by the market’s wild swings.
Fairfax Financial Holdings
Fairfax Financial Holdings (TSX:FFH) stock has more than doubled (up 156%) in just the past two years. Undoubtedly, the Canadian financial firm’s return to glory has been met with massive rewards. Many Canadians are starting to realize how Chief Executive Officer Prem Watsa earned the title of Canada’s Warren Buffett. He’s a great investor who always finds a way out of slumps. The stock may have gained substantial ground in recent years, but shares still look severely undervalued at 7.4 times trailing price to earnings (P/E).
The company has also been busy lately, scooping up Canadian mattress retailer Sleep Country Canada Holdings, which is a deal that could produce a vast amount of value for FFH shareholders. As the company continues scooping up bargains in the Canadian stock market while improving upon its insurance and reinsurance metrics, the stock seems like a portfolio mainstay.
Sure, it’s gotten hot of late, but the company’s fundamentals have improved accordingly. And with one of the best managers in Mr. Watsa, perhaps second only to Warren Buffett himself, I’d be willing to be a buyer of the stock on strength. Though there will never be another Warren Buffett, Watsa stands out as the next closest thing, in my opinion. With that, I believe a richer premium on FFH shares is more than warranted as we approach one of the more volatile periods of the year.
CN Rail
CN Rail (TSX:CNR) stock is going full speed ahead after dealing with brief union strikes and various delays. Of course, railroad halts will always be a potential for concern, at least until CN Rail manages to embrace AI and automation. Either way, the extensive rail network makes for a profoundly wide economic moat that I think will stand the test of time.
Though the current management hasn’t been able to achieve glorious efficiencies, I believe that it’s always a good idea to pick up shares of CNR whenever they’re historically discounted or in a funk. The stock is still down 12% from its high and going for 18.8 times trailing P/E. That’s cheap for CN Rail standards, too cheap, especially as rate cuts breathe new life into the North American economy.
Even if the stage isn’t set for an explosive rebound, I suspect CNR stock will do well over the next decade and beyond. Until it can roll higher, there’s a nice, growing dividend (2.11% yield) that will pay you to wait for the turnaround patiently.
