When it comes to investing in stocks for the long haul, there’s no question that finding high-quality companies you plan to hold for years is far more important than simply hunting for cheap stocks to buy now.
Of course, you still want to buy stocks as cheaply as possible, and any time you can find a high-quality stock trading below its intrinsic value, you’re seizing a significant opportunity.
However, a high-quality stock that’s only slightly undervalued is still more attractive than a lower-quality stock that’s ultra-cheap. Even if the lower-quality stock has more short-term recovery potential, the high-quality company will almost always offer far more growth potential over the long run.
So, with that in mind, if you’re looking for a high-quality stock to buy while it’s undervalued that you can hold for years, here’s why Brookfield Infrastructure Partners (TSX:BIP.UN) is one of the best to consider right now, while it’s down more than 10% from its high.
Source: Getty Images
Brookfield Infrastructure is the ideal long-term stock to buy right now
When it comes to finding high-quality companies that you can have confidence buying and holding for the long haul, there’s no question that Brookfield Infrastructure is one of the best candidates on the TSX.
First off, it owns a massive portfolio of essential infrastructure assets. This portfolio is diversified both by asset type and by geography, meaning Brookfield has taken an already low-risk business and mitigated risk even further.
By owning diverse assets such as ports, railroads, utilities, and telecom towers, Brookfield not only reduces risk but also increases its potential to capitalize on growth in different regions of the world and across various industries.
Furthermore, roughly three-quarters of the income it earns is indexed to inflation, which is another reason Brookfield is one of the best stocks to buy right now, especially while it trades more than 10% off its high.
In addition to its reliability as a defensive stock, Brookfield also offers considerable long-term growth potential. In fact, Brookfield is constantly selling off older, more mature assets at premium valuations and recycling that capital into new opportunities.
Therefore, it’s the perfect long-term TSX stock to buy right now while it’s undervalued. Not only does it have an incredibly reliable business model, giving investors the confidence to hold it in any market environment, but it also offers significant long-term growth potential, both through capital appreciation and the distributions it pays.
How cheap is Brookfield today?
At a quick glance, Brookfield Infrastructure stock is trading just over 10% off its 52-week high, which may not seem like a huge discount, yet for a high-quality stock like Brookfield, even a 10% discount makes it worth buying.
However, doing a deeper dive into Brookfield’s financials shows just how cheap it is today.
For example, Brookfield is currently trading at a forward price-to-funds-from-operations (P/FFO) ratio of just 9.5 times. That’s significantly lower than its five-year average forward P/FFO ratio of 12.2 times.
Furthermore, if you buy the infrastructure stock right now, you can lock in a significant dividend yield. In fact, Brookfield’s yield has climbed to 5.3%, while its five-year average forward dividend yield is just 4.5%.
Therefore, while one of the best and most reliable defensive growth stocks on the TSX trades off its high and offers investors a significant opportunity, there’s no question it’s one of the best stocks you can buy right now.
