Just like that, the TSX Index finds itself at fresh new all-time highs, thanks in part to renewed optimism about lower inflation, lower rates, and greater odds of a so-called no-landing (or soft landing) type of setup for Canada’s economy.
Indeed, Canada’s economy is anything but hot right now. Still, the stock market seems ready to keep on moving higher. Though many Canadians may feel as though we’re in some sort of economic recession, the consumer may be in a spot to ramp up on spending. Indeed, the days of “revenge spending” may be coming to a close.
Still, it’s hard not to imagine that many indebted consumers will feel better about spending just a bit more on conveniences and comforts, even if it means adding to that credit card bill. At the end of the day, rates are headed lower, and outstanding debts (think mortgages and personal loans) could become a lot less burdensome.
In any case, lower rates are good news that could help power the economy out of its seemingly stagnant state. At the end of the day, it’s the stock market that tends to be a bit of a better predictor of where the economy is headed. And right now, it seems like Canada’s economy could be in a spot to pick up off its two feet in 12-18 months.
Now, that doesn’t mean we’re out of the woods quite yet. The stock market could easily be in for a bit of a scare in the next year, especially if inflation rears its ugly head again. In any case, valuations on your average stock are a bit frothier than a year ago. And with that, investors looking to deploy new capital should be ready to insist on cheaper multiples and fatter margins of safety.
The economy is going to move in mysterious and predictable ways. So, it’s best to be equipped to invest for the long run. Do invest in the ups and downs and be ready to double down should bargains galore come to be! Here are two top bargain picks to consider as we exit September.
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Intact Financial
Intact Financial (TSX: IFC) is one of those top performers that I think doesn’t get as much applause as it deserves. Today, the stock is at a new high of $256 and change per share after soaring close to 26% year to date. Surprisingly, IFC shares have rocketed more than 91% in the past five years. That’s an extraordinary gain that doesn’t even consider the dividend (1.9% yield at writing).
As the property and casualty (P&C) insurer looks to nudge premiums on home and auto insurance policies, I do see profitability inching even higher from here. Undoubtedly, the strong second quarter may just be the start of a trend that helps Intact keep its edge intact for years to come. At 22.5 times trailing price to earnings (P/E), the well-run insurer still looks way too cheap. New investors, take notice!
Onex
Onex (TSX: ONEX) is a $7 billion holding firm that few Canadians have heard of. The company owns Westjet Airlines along with a wide range of other intriguing firms. At the time of writing, I believe you’re getting the basket of businesses at a nice discount while ONEX shares go for 6.69 times trailing P/E. The stock may be slumping again, now off 12% from 52-week highs.
However, I think that a recovering Canadian economy could be a boon to the hidden gem of a company. If you seek diversification in a wide range of intriguing businesses, I’d argue the stock is a solid buy right here and now.
