With the TSX Index slipping more than 4% to end off what’s been an extraordinary year of gains (still up 17.7% year to date), value investors may have an opportunity to take advantage of some of the bargains that Mr. Market may have left under the tree this holiday season. Undoubtedly, a new year also means another $7,000 for investors to contribute to their TFSAs (Tax-Free Savings Accounts).
So, even for those who don’t intend on picking anything up in the final few trading weeks of the year, it’s a good time to start thinking about what to add to your list as we head into 2025, which will likely be full of bargain stocks.
At this juncture, it seems like expectations are relatively muted for 2025. Indeed, we’ve had quite the run-up in these past two years. And though some, like Fundstrat’s Tom Lee, expect a correction to hit at some point in 2025 (he thinks the second half of 2025 is likeliest), investors shouldn’t look to time the market’s ups and downs. If there’s a solid business with a stock that trades at a low valuation, it can make sense to be a big buyer or start doing some nibbling.
So, with the Canadian dollar plunging to depths not seen since 2020 (close to US$0.69 after Wednesday’s plunge), I think there’s never been a better time to bet big on Canadian stocks over U.S. ones for 2025.
TD Bank
TD Bank (TSX:TD) stock is worth watching closely as we enter a new year. Indeed, TD shareholders are happily bidding 2024 farewell, with TD stock lagging behind the broader basket of Big Six names.
At the time of writing, the lagging TD is down close to 13% year to date. All the while, many of its large-cap peers have been surging, upstaging the once-cherished premier bank. Undoubtedly, it’s tempting to switch bank stocks at this pivotal moment if you’re still hanging onto TD shares. Still, many analysts don’t expect TD Bank stock to continue dragging its feet through another year.
Only time will tell if all the negativity is baked in at these prices. Either way, one has to think that TD will, in due time, follow the rest of its peers higher as the macro and industry environment looks to improve slightly. The banks have really been surprisingly high performers in recent months.
Indeed, TD’s new incoming CEO, Raymond Chun (a man who’s been working at TD for a whopping 30 years), will be put to the test in 2025. And though I have no idea whether he’ll be the person to steer TD to higher levels, I do think a new year with a new CEO and more clarity on a new path forward could set the stage for a relief rally of sorts.
Perhaps a scorching bounce could be in the cards as value-conscious investors look to play the relative underdog in the scene.
The bottom line
With a 5.1% dividend yield and a depressed multiple, I do view TD as one of the biggest bargains for investors to watch closely entering 2025.
It could go from an oversized laggard to a leader if the bank takes the proper steps in its next chapter. Though there’s no guarantee of success, I think the stock is cheap enough and expectations are low enough such that the odds seem to be in favour of long-term investors.
