When it comes to stock investing, balancing risk and reward is key. While it’s tempting to chase high returns, successful investors understand the importance of stability and minimizing downside risks. Some stocks are naturally volatile, with potential for outsized gains but also the chance of significant losses. Small-cap commodity stocks, for instance, can be particularly unpredictable. Instead of focusing solely on high-growth stocks, it might be wise to consider companies with strong fundamentals that offer solid returns with manageable risk.
Here are three of the best Canadian stocks investors can buy right now — stocks that combine value, stability, and growth potential.
1. TD Bank: Stability with long-term growth
Toronto-Dominion Bank (TSX:TD) has cemented itself as one of North America’s largest and most reliable financial institutions. As the sixth-largest North American bank by assets, TD serves over 27.9 million customers across its diverse operations, including Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale Banking. The bank generates over half of its earnings from its Canadian Personal and Commercial Banking segment, which provides a stable and consistent revenue stream. The Wealth Management and Insurance division, contributing about 20% of earnings, also has relatively high returns on equity, making it a strong performer within TD’s portfolio.
With $2.1 trillion in total assets and deposits of $1.3 trillion, TD’s financial strength remains rock solid. The bank’s common equity tier-one ratio stands at a robust 13.1%, reflecting its solid capital position. While TD stock has underperformed the Canadian banking sector in recent years, it is currently reasonably valued at $85.30 per share, offering a 4.9% dividend yield backed by a sustainable payout ratio.
TD’s recent strategy adjustments, such as the sale of its 10.1% stake in Charles Schwab and its efforts to improve operational efficiency, should position the bank for long-term success. If these initiatives succeed, investors could see annual returns of 10-12% over the next few years, making TD an attractive, stable investment with long-term growth potential.
2. goeasy: A high-risk, high-reward opportunity
For high-risk investors, goeasy (TSX:GSY) could offer higher returns. As a non-prime lender in Canada, goeasy has experienced greater volatility in recent months, with the stock down over 20% from its peak earlier this year. Much of this decline can be attributed to external factors, such as the U.S.-Mexico-Canada trade tensions, which have created economic uncertainty.
Currently trading at around $151 per share, goeasy is priced at a 27% discount to its long-term price-to-earnings (P/E) ratio, providing a potential opportunity for savvy investors. With a history of strong growth, goeasy has the potential to double investors’ money over the next three to five years if the market stabilizes and economic conditions improve.
However, goeasy’s high growth comes with greater risk. Investors should be prepared for fluctuations in the short term but could reap significant rewards if they hold through the turbulent periods. For patient investors, this stock could offer one of the best growth opportunities in the Canadian market.
3. Exchange Income: Undervalued with a strong yield
Exchange Income (TSX:EIF) is a diversified company with a focus on aviation and manufacturing, making it an interesting choice for investors looking for stability and income. At under $51 per share, EIF has seen a dip of about 12% from its high earlier this year. Analysts currently believe that the stock is undervalued by roughly 27%, with an estimated 38% upside in the near term.
In addition to its growth potential, Exchange Income provides an attractive dividend yield of 5.2%, paid out as monthly dividends. This consistent income stream, coupled with the stock’s undervaluation, makes it a strong candidate for investors seeking both capital appreciation and reliable income.
With its diversified revenue base, EIF is well-positioned to weather economic fluctuations while continuing to generate steady cash flow. For income-focused investors looking to capitalize on a potential recovery, EIF presents a good opportunity.
The Foolish investor takeaway
When it comes to stocks, a balanced approach is essential. TD Bank, goeasy, and Exchange Income each offer unique opportunities, combining growth potential, stability, and income. By carefully selecting stocks that match your risk tolerance and investment goals, you can build a portfolio that offers both long-term gains and manageable risk.
