Finding hidden gems in the stock market is easier said than done. Of course, the market is essentially considered to be a weighing mechanism, and the efficient market hypothesis says that pretty much all available information that’s out there is priced into stocks at any given moment in time.
Accordingly, finding diamonds in the rough can be more difficult than investors think. Having the foresight to see where the puck is headed over the long term and determine whether an individual stock is undervalued based on certain assumptions is key.
These three stocks certainly fit the profile (in my mind) of companies that may be relatively undiscovered by investors (particularly global investors) who are unfamiliar with the Canadian market.
Fortis
Fortis (TSX: FTS) is the owner and operator of 10 utility transmission and distribution assets in Canada and the United States. The company caters to approximately 3.4 million customers and possesses minority stakes in electricity generation with multiple Caribbean utilities. With strong recurring revenue streams generated from its regulated and non-regulated operations, this dividend stock (yielding around 3.9%) is worth considering due to its Dividend King status and its cash flow stability in this current environment.
Fortis is certainly one of the top utility stocks, and I think it is worth considering in this current market environment. Given the secular tailwinds this sector has (if artificial intelligence is really going to be as big as folks say it will, we’re going to need a lot more electricity moving forward), this is a stock that could be in its early innings of an impressive bull run.
Toronto-Dominion Bank
Toronto-Dominion Bank (TSX: TD) is a leading Canadian bank that’s well-known for having one of the most rock-solid balance sheets of global players. With a strong U.S. presence (TD actually has more retail branches in the U.S. than in Canada), the company provides diversified geographic exposure and remains one of my top picks in this sector for this reason.
The company’s stock price has certainly been volatile in recent years, but the trend thus far this year has been solid. Investors appear to be flocking back into Canadian banks, and it’s no surprise to me that TD is mopping up a lot of the capital that’s coming into this sector.
With an impressive focus on efficiency and profitability, TD remains a top dividend stock, which I think remains a hidden gem, particularly among its Canadian counterparts.
Restaurant Brands
Restaurant Brands (TSX: QSR) is one of the top hidden gem stocks in the market, at least in my view. The company derives its revenue from company-owned restaurants, royalty fees, and lease income from franchised stores worldwide.
Restaurant Brands International is targeting an increase in store count from 31,070 in 2023 to 40,000 by 2028, with plans to add approximately 1,800 new restaurants annually. Furthermore, the company aims to remodel 600 of its recently acquired Carrols restaurants and accelerate the expansion of Firehouse Subs in the U.S. and Canada.
Its main focus for Popeyes includes extending its operating hours and implementing operational enhancements. The company plans to raise the number of Popeyes restaurants in the U.S. and Canada from 3,400 to 4,200 by 2028 while simultaneously improving its operational efficiency.
