It’s time to start thinking about what to buy with your latest TFSA (Tax-Free Savings Account) contribution. As you may have heard, the contribution for 2025 is sticking at $7,000.
Indeed, such a modest sum isn’t enough to purchase two shares of Constellation Software (TSX:CSU), which are currently trading at just north of $4,400 per share on the first day of 2025. And though it may be tempting to put off one’s contribution on the year, perhaps after the TSX Index has fallen into a bear market or something close to it, I think that investors should always pursue names which they view as undervalued.
The U.S. stock market seems frothy, but on this side of the border, I see ample names with valuation multiples that are well below that of their longer-term historical averages.
Indeed, in a prior piece, I noted that the Canadian stock market was the place to look for deeper value and that American investors would be well-served by taking advantage of the strong greenback by picking up a couple of low-cost TSX stocks. While some investors are riding into 2025 with caution, I do think that timing markets could lead to missing out on further gains.
At the end of the day, the stock market is a market of stocks, and not every name will take a massive hit to the chin once Mr. Market doles out a correction. Without further ado, here’s a name that can help turn your latest $7,000 contribution into a TFSA growth powerhouse of sorts.
CN Rail
I’ve been pounding the table on shares of CN Rail (TSX:CNR) in recent weeks, thanks in part to the painful finish to 2024. Indeed, the stock flirted with bear market territory (that’s a 20% drawdown from peak levels) before jumping back mildly.
Though it’s hard to time a bottom in such an economically sensitive stock, given headwinds could stick around in the new year, I’d not be afraid to jump in here if you’re seeking to invest your TFSA proceeds for the next 10–20 years. The nearer-term forecast is a giant question market right now, with potential Trump tariffs and woes that could sink Canada’s economy in 2025.
Either way, CN Rail will land on its feet and recover, as it always tends to do after nasty economic setbacks. Freight volumes will go up in due time (likely when the economy heats up), and when it does, CN will be prepared to meet the demand. In the meantime, there are lower-hanging fruit for the firm to grab. I think it’s time to pounce on the dividend growth hero before headwinds fade and carloads look to swell again.
Of course, CN Rail is playing the long-term game, so we don’t want fireworks to happen overnight. The company has been plagued by work stoppages, wildfires, and other “temporary” woes last year. In the new year, it will be interesting to see how CN Rail can power ahead, whether or not new unforeseen hurdles present themselves. With expectations being as low as they are, I think there’s a good chance CNR stock could pivot and bounce faster than buyers can step in.
The bottom line on CNR
So, in short, catalysts seem few and far between, but with muted expectations, it may not take much to reverse course. CN Rail is a dividend growth powerhouse and one that doesn’t deserve to be so heavily discounted.
