Top Canadian Value Stocks I’d Consider for My TFSA Growth Strategy

In this extremely volatile market, many investors are looking at making a change. Some investors are interested in looking outside of North America to Europe and Asia as places to invest. Others are looking at adjusting their exposure to specific sectors. Still, others may be looking to transition from growth-heavy portfolios to one that consists mainly of value stocks.

I think there’s a good reason to look for value in today’s market. Valuations across the board have surged in recent years as investors have benefited from betting on the companies with the highest growth rates. But over the long term, many prominent investors like Warren Buffett will tell you value tends to outperform. And in the Canadian market, there happen to be a number of great value options worth considering.

Here are two top value names I continue to look at as potential long-term winners amid this turmoil.

Manulife Financial

Canada’s largest insurance company, Manulife Financial (TSX: MFC) remains a top value pick for investors looking for a relatively stable place to invest their capital for the next five to 10 years.

Looking at the company’s stock chart above, it’s clear that many market participants agree with this view. Despite seeing a stock price surge of more than 150% over the past five years, Manulife’s valuation still hovers around 15 times trailing earnings. That’s impressive, particularly when investors price in the company’s forward earnings growth outlook.

I think the company’s transition toward becoming a more China-heavy company (particularly with its wealth management business in this increasingly wealthy economy) is a good strategy in the long term. While there are certainly some growth concerns around the Chinese market, it’s clear that many investors like the diversification this strategy shift has brought to the table.

With a dividend yield of more than 4% at the time of writing, Manulife stock provides the sort of relatively stable total return profile I think value investors want right now. Accordingly, this is a stock I’m going to stand behind as a potential winner moving forward.

Royal Bank of Canada

The largest bank in Canada, and one of the largest in the world for that matter, Royal Bank of Canada (TSX: RY) remains a juggernaut Canadian investors have benefited from owning for decades.

Now, as the stock chart above shows, the past five years have brought bumps for investors. However, over this time frame, RY stock has still nearly doubled. That’s an impressive return and one which I think reflects the company’s rock-solid balance sheet and earnings profile over time.

The company has continued to grow domestically and abroad, becoming one of the most integrated Canadian banks with the global banking system. In other words, for investors looking for a global bank trading at around 13 times trailing earnings with solid bottom-line growth prospects, this is a top option to consider.

I think a portfolio comprising both stocks may outperform relative to other portfolios that are under-exposed to companies like Manulife and Royal Bank with solid long-term total return prospects.