Investing in the stock market typically becomes a risky affair as September comes around. There is just something about this month that makes the market more volatile than other times of the year, leading to many investors being wary of being net buyers in September.
After a volatile start, September 2024 might become a major turning point for investors who have been hurting for a while now.
The high inflation and subsequent interest rate hikes over the last couple of years to combat it left the economy in a bad state.
The general public had to cut discretionary spending, and high borrowing costs made publicly traded companies suffer under financial pressure. The interest rate hikes were always going to take time to bear fruit.
With inflation under better control, the long-awaited interest rates finally came. Leading up to it and when the rate cuts were announced, the stock market rallied. The Canadian benchmark index is rallying to new all-time highs. As of this writing, the S&P/TSX Composite Index is up by a massive 27.7% from its 52-week low.
While it is still unclear whether the Bank of Canada rate cuts will truly fix things for the economy sustainably, the stock market rally is underway. Many high-quality stocks have already recovered to better valuations, even the Big Five bank stocks. However, there is one Canadian bank stock that seems like a far more attractive investment right now than its larger peers: National Bank of Canada (TSX: NA).
National Bank of Canada
National Bank of Canada is a $43.6 billion market capitalization bank headquartered in Montreal, with over 2.4 million clients across the country. The sixth of Canada’s Big Six banks, National Bank of Canada is finally starting to get the respect that it deserves as one of the largest financial institutions in the country. Despite its significantly smaller size than its peers, stock market investors cannot ignore it.
NA stock has recently picked up pace and started outpacing the larger rivals that dwarf its market capitalization. The bank is carving out its own competitive advantages that sets it apart from the larger banks, giving it plenty of room to grow and drive shareholder value higher.
Earnings week for banks made Christmas come early for NA stock as its third-quarter earnings for this fiscal year saw it exceed revenue estimates by 4.2% and earnings per share by 14%. The bank’s better-than-expected quarterly results were driven by stronger performance in its financial and wealth management markets.
The key interest rate cuts spurred wealth management and trading activities, benefiting the broader financial sector, including National Bank stock.
Foolish takeaway
As of this writing, National Bank of Canada stock trades for $128.05 per share, hovering around new all-time highs. Up by 52% from its 52-week low, its 11.8 forward price-to-earnings ratio suggests that it is still quite cheap at these levels.
While its 3.4% dividend yield might not look massive by any standard, it looks as though there is room for dividend growth this year. It might be wise to add its shares to your self-directed portfolio if you seek a strong growth and reliable income holding from the financial sector.
