2 High-Flying Stocks Set to Soar by Year’s End!

Royal Bank of Canada (TSX:RY) and another top stock that could keep on rising until 2025.

| More on:
space ship model takes off

Source: Getty Images

With the broader markets picking up momentum, investors may wish to look closely at the breakout names that may have further to fly as we head into election season and, shortly after, Santa Claus rally season. Undoubtedly, buying stocks on strength can be a risky proposition, especially if you’re paying a big, fat premium to historical averages.

That said, if the fundamentals have improved in the past year to justify the higher multiple, I think it makes sense to pay a somewhat higher multiple for a fantastic business that’s firing on all cylinders with tailwinds at its back.

Undoubtedly, the great Warren Buffett once noted that it’s far better to pay a “fair price” for shares of what he deems as a “wonderful business” than the other way around. Indeed, cigar-butt investing (buying dirt-cheap stocks of companies that aren’t all so wonderful) can have its drawbacks.

And for those inexperienced with picking up deep-value bargains, one may end up wandering into a value trap. Either way, here are hot stocks that I find to be cheap with more upside potential for the rest of this fourth quarter.

While I have no idea if they’re set to soar (they arguably already have) any further, I do think the following names are great additions for those with a time horizon between four and six years.

Fairfax Financial Holdings

It’s about time we gave Prem Watsa, the genius manager behind Fairfax Financial Holdings (TSX:FFH) more credit. With shares up a scorching-hot 177% in the past two years, Fairfax has actually put the TSX Index to shame. Indeed, I don’t think the run is over with, either. The company keeps making smart, deep-value moves in the Canadian market.

Whether we’re talking about the acquisition of Sleep Country Canada, the largest sleep retailer in the country, or the more recent purchase of a controlling stake in hockey brand Bauer (a personal favourite of mine!), Fairfax has not shied away from swinging at the low-cost opportunities thrown in its strike zone.

In a prior piece, I highlighted that there was no shortage of bargain-priced businesses in Canada and that Fairfax could really jolt its business by pulling the trigger on them as their targets stumble across hard times. As rates fall and Fairfax continues to make smart deals, I think FFH stock’s market-beating ways can continue on.

In any case, the stock goes for 7.7 times trailing price-to-earnings to go with a 1.2% dividend yield. With a nice dividend, a cheap multiple, and continued momentum, I’d not hesitate to scoop up shares this October.

Royal Bank of Canada

Royal Bank of Canada (TSX:RY) stock is on a hot run of its own, now up 40% in the past two years. Indeed, the $246.2 billion banking top dog has left its peers in the dust. Though shares are markedly pricier than some of its peers at 15.4 times trailing price-to-earnings, I still think the stock is more than buyable at $174 per share.

However, I would hope for a pullback before really piling into shares. Given Royal’s impressive strengths and the likelihood the Canadian economy could improve in the new year, I’m not so sure that dip-buyers will get the correction they’re looking for. Maybe buy a quarter position here with the intent of putting the other three-quarters to work after a plunge.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fairfax Financial. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA Investors: 3 Rock-Solid Dividend Payers Yielding up to 6.1 Percent

Here’s why Canadian Natural Resources (TSX:CNQ), Canadian Utilities (TSX:CU), and a high-yield REIT stand out as top Canadian dividend stocks…

Read more »

Man data analyze
Dividend Stocks

Invest $20,000 in This Dividend Stock to Earn an Average $88.73 Each Month!

Do you want monthly income that lasts? Investors can grab hold of at least $88.73 each and every month from…

Read more »

data analyze research
Dividend Stocks

Dividend Powerhouses: Top Canadian Stocks to Enhance Your Portfolio

These stocks have increased the dividend annually for decades.

Read more »

dividends grow over time
Dividend Stocks

The Smartest Dividend Stocks to Buy With $5,000 Right Now

The smartest dividend stocks on the market can provide decades of growth on autopilot. Here's how and what stocks you…

Read more »

Canadian dollars are printed
Dividend Stocks

Build a Lucrative Passive-Income Portfolio With Just $35,000

Canadians can build a lucrative passive-income portfolio with a small capital and a pair of dependable dividend payers.

Read more »

profit rises over time
Dividend Stocks

Buy 2,990 Shares of This Stock for $165.25/Month in Passive Income

A high-yield dividend stock can transform your investment into monthly passive income streams.

Read more »

close-up photo of investor Warren Buffett
Dividend Stocks

3 Warren Buffett Stocks to Buy Hand Over Fist in November

Warren Buffett has been buying Occidental Petroleum (NYSE:OXY) hand over fist. He previously owned the similar Canadian oil giant Suncor…

Read more »

dividend growth for passive income
Dividend Stocks

Is Intact Financial Stock a Buy for its 1.8% Dividend Yield?

Intact Financial's dividend is not that attractive, but its strong history of execution and dividend growth are compelling factors for…

Read more »