On September 26, the TSX Composite Index set a new all-time high of 26,044. Despite some very minor volatility, it is less than 0.13% below that level today. It’s no surprise why it happened. The TSX has been in a bull market all year long, thanks to especially strong gains from TSX tech stocks, utilities and banks. Energy companies haven’t fared quite as well. Thanks to a late third-quarter crash in oil prices, they are mostly down for the year. They dragged down the index too much, though. They might even contribute to gains in the coming months.
Whether you like dividend stocks, tech stocks or anything in between, you can find value in today’s market. And to prove it, I’m sharing two Canadian stocks I have been buying this year despite the TSX flirting with all-time highs. So, without further ado, here are the stocks.
Brookfield
Brookfield Corp (TSX:BN) is a Canadian financial conglomerate whose shares I’ve been buying this year. The company’s operations are somewhat hard to describe. It has its own operating businesses (real estate, insurance, etc) and also owns large stakes in various partially owned subsidiaries (asset management, renewables, etc). It’s involved in most sub-sectors of the financial services industry except banking.
Why do I like Brookfield stock?
When I bought it, I liked the fact that the shares traded at a significant discount to net asset value (NAV). Since the time I started buying, most of the NAV discount has disappeared. However, the company still has many things going for it today.
For one thing, it’s still relatively cheap, trading at 13.5 times earnings, 1.9 times book value, and 0.8 times sales.
Second, its insurance subsidiary is growing extremely rapidly, having doubled its assets and earnings on a year-over-year basis.
Third and finally, Brookfield and its subsidiaries have had a lot of success raising money and making deals. For example, the company raised more than $30 billion in the last 12 months and closed the American Enterprise Life acquisition in the same period.
Taking everything together, Brookfield looks like a promising business. It does have a lot of debt, but the leverage is well-managed and goes toward growing the business. Overall, I’m a fan.
TD Bank
Toronto-Dominion Bank (TSX:TD) is Canada’s second-biggest bank. It is known for its high capital ratios and its fast-growing U.S. retail banking business. It is the most American of Canadian banks, with about 40% of its earnings coming from south of the border. It’s also one of the cheaper Canadian banks, trading at 10.8 times adjusted earnings at a time when its competitors are approaching 15 times earnings.
Why is TD Bank so much cheaper than its peers?
It all has to do with risks. If TD were able to earn normal amounts of profits with no fuss, it would probably be doing great this year: revenue was up 10% last quarter, and segment earnings (except the U.S. segment) were also up by double-digit percentages. The problem is that earnings were less than $0 in the U.S. retail segment. That segment is being held back by a U.S. Department of Justice investigation into its money-laundering practices. The bank has booked $3.5 billion related to expected fines. That’s holding back earnings this year, but TD expects to have the investigation wrapped up by year’s end. So, TD is cheap compared to a conservative estimate of next year’s earnings.
