If you sold in May and went away, you missed out on a more than 4% gain in the TSX Index and S&P 500, a striking return in around two weeks. And while Trump’s tariff talks may be far from over, it seems like the bargain hunters are ready and willing to step in despite recession risks, which Jamie Dimon, CEO of JPMorgan Chase, still believes is on the table for the American economy.
Undoubtedly, a recession has proved quite elusive in recent years. While we’ll eventually get one (whether it’s tariffs, a crisis, or some other event that weighs heavily on economic growth), investors shouldn’t forego the low-cost stocks that they’re tempted to pick up just because someone smart on Wall Street thinks that the economy could be in for a bit of a doozy.
At the end of the day, long-term investors must steer through all sorts of environments. And riding through the rocky terrain is just a part of what’s to be expected. The market road to retirement isn’t always freshly paved. Many beginning investors find this out the hard way as they sell into a sell-off, missing the sharp rebound and being forced to buy back their shares at higher prices.
Of course, it was hard to buy the April dip in stocks. But if you went on a month-long vacation the day after Liberation Day tariffs sank global financial markets, you would have done just fine. In any case, changing your investing game plan based on a single event or pundit prediction is a dangerous game that may lead to returns that trail those of the market averages.
In this piece, we’ll consider two stocks that I find to be great bargains right now as the TSX Index looks to add to its recent breakout gains.
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CN Rail
CN Rail (TSX: CNR) stock is in recovery mode again after steadily descending for the past year. While most stocks tend to take the elevator down and the stairs back up again, some names tend to do the opposite. With CNR shares soaring over 14% so far in May, the railway giant seems to be taking the elevator back up after steadily rolling down the stairs for just north of a year. Indeed, the dividend-growth stock is buying back its own shares, as they look severely undervalued and oversold.
With promising growth drivers and a lower bar to pass for future quarters, I think the latest rally is worth getting behind. The stock still yields a generous 2.4%, with a modest 20.8 times trailing price-to-earnings (P/E) multiple. For a wide-moat firm that stands to gain if a potential new North American trade deal gets announced (soon, hopefully), I’d not dare bet against the dividend grower, as it makes a run past $150 per share.
Bank of Montreal
Bank of Montreal (TSX: BMO) has also been heating up of late alongside the TSX Index, now up over 11% in the past month. At 13.5 times trailing P/E, with a 4.44% dividend yield, BMO stands out as a great deal of the big Canadian bank stocks.
With new highs in sight and respectable exposure to businesses south of the border, I’d be inclined to be a buyer rather than a seller of the $104.5 billion financial at these levels. Sure, the ride could be bumpier, with a 1.20 beta, which entails more correction with the broad market, but for the impressive dividend, the name certainly seems like a great way to ride the economy higher once we’re given more clarity with trade.
