The S&P/TSX Composite Index is set to close out an excellent year after a 21% gain to-date. Unfortunately, today it is harder to find stock bargains than it was at the end of 2023.
However, if you are willing to sift through the weeds, there are some gems to be found. Here are two very unique stocks to buy if you have $1,000 and aren’t afraid to be a little contrarian.
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A REIT stock that is trading for 60 cents on the dollar
If you want an attractive combination of income and value, Minto Apartment Real Estate Investment Trust (TSX: MI.UN) is an attractive stock to look at. It has a portfolio of very well-located residential apartment properties in Toronto, Ottawa, Montreal, and Calgary.
Minto’s stock is down over 13% this year. However, the stock decline masks some very good progress that Minto’s management team has made in the year. Firstly, it has brought its variable debt burden down to almost zero.
After some recent non-core asset dispositions, Minto’s debt-to-book value is now below 40%. Its balance sheet is in very good shape.
The REIT has been putting up strong high single-digit rental rate growth and double-digit funds from operations (FFO) per unit growth. Minto just increased its distribution by 3% (its sixth consecutive increase). It yields 3.5%.
The stock is extremely cheap and trades at a 40% discount to its private market value. Management has started to aggressively buy back stock. You might have to be a patient investor. However, at some point, the market will recognize the value of its assets and investors will be rewarded.
A quality railroad that is beaten up on macro fears
For a solid Canadian blue chip stock, it has been a volatile year for Canadian Pacific Kansas City (TSX: CP). Its stock started with a price of $105 per share, soared up to $117 per share, dropped to $106, then soared to $118 per share, and now it is back to $107 per share.
A lot of the volatility is related to circumstances out of CPKC’s control (like incremental weather, trade disruptions, a freight recession, and strikes). However, the company has done very well with the operational and financial levers it can control.
In fact, in its recent third-quarter results, it was one of the only North American railways that demonstrated year-over-year growth in revenues and earnings per share. After its merger with Kansas City Southern railroad, CPKC has the only rail network that connects Canada, the United States, and Mexico.
Its North America network is allowing it to provide very unique and efficient transport solutions for its customers. The company’s operational expertise is helping create network synergies. While these synergies continue to be unlocked, management believes they are already ahead of schedule.
Certainly, the new Trump administration could temporarily disrupt North American trade. That is a notable threat to CPKC’s investment thesis. However, it is likely posturing.
Canada and Mexico are crucial partners that are supporting the recent re-shoring efforts of hundreds (if not thousands) of American companies. The tariffs could hurt Americans as much as they hurt its trade allies. That is one major reason why the recent tariff announcements are not likely to impact CP’s business long term.
CP has delivered solid low-teens total returns over the past five years. If it can continue to execute its targeted 15%/annum growth plan, future returns are likely to match or even exceed those of the past.
