As the TSX Index continues inching to new highs, Canadian investors may wish to take a step back and consider some of the value names that have been left behind since the post-election surge. Undoubtedly, the names that have sat out the recent run in stocks may be better positioned to make up for lost time, so to speak.
Of course, there is no way to guarantee that a year’s relative laggard is better positioned to outperform in the future. That said, if you can spot a fundamentally sound firm that’s been dragging its feet due to a lack of exciting catalysts, you may have a name that will be spared come the market’s next correction. Though market corrections are tough to time, predict, and foresee, investors shouldn’t waste time trying to get out ahead of one.
Instead, they should be ready to invest through one and be ready to add to their favourite positions at lower prices. Whether that means keeping a sizeable cash portion sitting on the sidelines or rotating out of safe haven assets (think gold) that don’t fall as much in a market-wide descent, new investors should know how to deal with more turbulent environments.
In this piece, we’ll check out two names that I view as relative bargains in a fairly-priced market that could be in for anything come the new year.
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Microsoft
Microsoft (NASDAQ: MSFT) is a U.S. enterprise tech titan and one of the leaders in the big AI race. Though there are some great Canadian companies that are putting AI to use, I still think that most investors would be better served by owning a piece of the AI juggernaut itself. With its hefty stake in ChatGPT-maker OpenAI and billions in planned spending to unlock the full power of generative AI, the multi-trillion-dollar firm seems to have way more growth left in the tank.
And though some may consider shares to be on the rich side at 34.64 times trailing price to earnings (P/E), I consider the name to be a relative bargain given its standing in AI. Looking ahead, I’d look for Microsoft to get more aggressive with its AI PC push as it makes its Copilot even more capable.
Though MSFT stock’s 13% year-to-date rally is respectable, it still falls short of the tech-heavy Nasdaq 100, which is up more than 25%. Nobody knows how long MSFT shares will continue consolidating in the low $400 range. Regardless, I’m inclined to view the Magnificent Seven AI titan as a sleeping giant that could wake up at any time!
Bank of Montreal
Bank of Montreal (TSX: BMO) is more of a traditional value stock for investors who have more than enough AI exposure at the core of their portfolios. And for investors seeking to batten down the hatches going into the new year, BMO stock stands out as a potentially intriguing gem of a stock. Relatively speaking, BMO stock has been lagging, with shares up just over 2% year to date.
With a nice 4.7% dividend yield and a modest 15.4 times trailing P/E multiple, those seeking a bit more yield and a lot more value in the banking scene may wish to look to the name before it has a chance to prove that it’s one of Canada’s better financial plays.
