It’s been quite a rough month for Canadian investors overweight in U.S. names. Undoubtedly, the TSX Index hasn’t felt as much impact from Liberation Day tariffs and the escalating trade spat between the U.S. and China.
While the elevated volatility could carry into May and perhaps span the entire summer as we hear a back and forth between Trump and the leaders of various other nations, I wouldn’t seek to get out of stocks right here, especially if you’re well-diversified, with a good amount of exposure to Canadian value stocks, which seem poised to outperform their U.S. counterparts as significant upside becomes harder to come by amid the many question marks surrounding the state of world trade.
In this piece, we’ll take a closer look at one surprising outperformer in 2025 that may continue surging higher as the rest of the market fluctuates painfully in both directions. Indeed, the Canadian banks seem to be more of a risk-on play, as tariffs between Canada and the U.S. threaten to propel Canada’s economy into a slight economic downturn. Indeed, recession and inflation seem likelier than just a few weeks ago.
Either way, TD Bank (TSX:TD) has arguably had the band-aid ripped off last year, as investors sold the name furiously amid the money-laundering crisis. With a new leader in place and a mission to make the $150 billion banking juggernaut great again, I think there are enough company-specific catalysts in place to take shares above the $80 level, regardless of what the S&P 500, TSX Index, or Nasdaq 100 does next.
The bank’s betting big on AI
Indeed, TD Bank has gone a long way to improve its anti-money laundering (AML) defences. And though the bank probably won’t make as much traction in the U.S. over the next few years, I think it has all the tools to bolster its domestic growth as it doubles down on various technologies to give it a bit of an edge. Recently, TD Bank opened a new artificial intelligence (AI) research and development office in New York City.
Indeed, TD is playing the long game with AI. Over the medium term, the AI-driven personalization factor could really hit the spot with younger retail customers, many of whom have eagerly adopted high-tech offerings in recent years.
In any case, I think it’s time to think of TD Bank as more of a high-tech play that has what it takes to disrupt. Personally, I’m not so sure the bank’s high-tech approach is fully reflected in today’s share price. At the time of this writing, shares of TD Bank go for 18.1 times trailing price to earnings (P/E) to go with a 4.9% dividend yield.
The stock looks cheap
Looking ahead to next year, shares look considerably cheaper, going for 11.0 times forward P/E. As the bank aims to show investors its back, I’d not take profits on the name as it leads the Big Six higher in a rough year. Last year was forgettable for TD, but 2025 could have all the makings of a great year that sees the bank make up for lost time.
Now up over 12% year to date, TD stock could be the best catch-up trade in the Canadian financial scene.
