The Canadian stock market is home to some pretty cheap stocks that may be worth adding to the radar going into the new year. Undoubtedly, a new year means another TFSA (Tax-Free Savings Account) contribution to put to work. And though the amount ($7,000 come January 2025) hasn’t changed, I think that investors should at least be thinking about what types of names they should pursue for their long-term TFSA portfolio, if not in January, perhaps at some point in the first half.
Undoubtedly, some pundits and market watchers seem to be treading cautiously going into the new year. After a spectacular year for the U.S. and Canadian equity markets, I’d argue that doing such is only prudent, even if it means missing out on more gains from this tremendously upbeat market.
Still, if you seek historically depressed multiples on wide-moat firms that can re-accelerate their sales and earnings growth, the following names seem worth adding to the top of one’s buy watchlist as we head into mid-winter. And, of course, there are solid, growing dividends that will compensate you for your time invested over the years.
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CN Rail
CN Rail (TSX:CNR) is back below $150 per share after taking a 1% hit on Wednesday’s upbeat session of trade. Indeed, CN Rail has been a massive underperformer for nearly four years, pretty much going nowhere since the start of 2021.
With a weak 25% gain in the past five years and a lengthy list of headwinds and concerns to worry about, I think it’s time to step in as a contrarian. Sure, CN Rail doesn’t have a heck of a lot going for it in this red-hot bull market. But that’s exactly why value hunters should consider the name, especially if they missed the hot run in some of the market’s high-flyers in tech.
Indeed, strikes have contributed to dragging the operating ratio higher (lower is better) of late. And though external factors partially bear the blame for the lack of performance, I think the company should pursue options to drive out of its multi-year consolidation.
CN Rail has plenty of room to drive down its operating ratio in the new year. Further, perhaps taking advantage of an acquisition south of the border to spice things up in a bid to outdo its better-performing rival CP Rail (TSX:CP), or CPKC, could make sense.
Either way, investors are likely getting tired of the recent share price underperformance of a railway that used to be one of the most efficient operators in the continent. Perhaps bringing aboard some more industry talent in the upper levels could act as a catalyst to drive the name higher in 2025.
Insider buying at CN Rail encouraging
In any case, the stock is getting so cheap that even insiders, including CN Rail chief executive officer Tracy Robinson, have been buying the latest dip.
At around $149 per share, CNR shares go for 17.6 times trailing price to earnings with a dividend that’s just shy of 2.3%. For such a proven, wide-moat dividend grower, I think long-term TFSA investors have to think of being net buyers here over the coming weeks and months. They’ll be in pretty good company at just shy of $150 per share with the recent insider buying activity on the latest correction in shares.
