The only thing better than a cheap stock is one with quite a bit of newfound momentum. Indeed, not all stocks that are on a hot run are expensive. In fact, many of them may still be undervalued if the underlying fundamentals and growth narrative have improved markedly over time.
Indeed, I view stocks supported by earnings growth as more tempting to pick up on strength than the many stocks that have risen primarily due to multiple expansions. Sure, growth stories can be nice to buy a stock on, but unless such stories can realistically translate into better fundamentals or growth moving forward, the risk of a correction could be a tad higher. Either way, investors must do more than enough due diligence with the names on the market’s hot list at any given time.
Momentum and value can exist in a single stock!
I’ve said it before, and I’ll say it again: just because a stock is at or around 52-week lows does not necessarily indicate significant undervaluation (often, damage to a stock is warranted, given headwinds or mismanagement).
At the same time, stocks at new all-time highs may not be overvalued just because their share prices are a bit on the overheated side. As always, though, hot runs can precede the vicious near-term correction, so do have a plan should a hot stock turn on a corner and become even cheaper than the price you first initiated a position.
In this piece, we’ll check out one name, which, in my personal view, is cheap with strong momentum. And if I had to guess, the momentum has a good chance of carrying into year’s end. Of course, only time will tell, but the following names will be tough to stop as they continue doing many things right.
CIBC
CIBC (TSX:CM) is a cheap (12.1 times trailing price to earnings) Canadian bank stock that’s up around 45% in the past year. Indeed, many overly skeptical investors got this name wrong, as it clocked in many quarterly results that weren’t just better than feared; they were pretty sensational. Of course, it will be harder to keep rallying at such a blistering pace in 2025. Still, the stock remains one of the cheaper ways to get robust momentum alongside a 4.41% dividend yield and a multiple that’s not as high as it could be.
As Canada’s economy faces new challenges in 2025, it will be interesting to see how CIBC’s mortgage book holds up. It does have more mortgage exposure than your average Canadian bank, so it could take a huge hit if tariff headwinds weigh heavily on the labour market while the Bank of Canada (BoC) grows reluctant to cut interest rates further due to the potential inflationary impact.
Indeed, the BoC may wish to cut rates moving forward, but if inflation doesn’t play by the rules, their hands may be tied. If you’re comfortable with more exposure to Canadian mortgages, CM stock could be an intriguing buy for the extremely long haul.
