If you’ve contributed to your TFSA (Tax-Free Savings) but have yet to make a big purchase, perhaps now’s a good time to start putting a portion ($7,000 is the TFSA contribution limit for 2025) to work in a cheap stock that still has ground to gain despite swelling market valuations and growing fears of another market correction, perhaps due to tariffs or something else entirely.
Though the TSX Index and S&P 500 are on the pricey side, with the latter being far more expensive than the former, I do think we’re entering an environment that’s more favourable for stock pickers rather than simple indexers. Indeed, there are still great, low-cost stocks out there mixed in with some of the frothy, even expensive names that are at higher risk of nosediving come the next market-wide pullback.
Here are three stocks that are hot, but have legs to keep moving higher in the next year.
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Fairfax Financial Holdings
It’s been quite a treat for shareholders of Fairfax Financial Holdings (TSX: FFH) in the past few years. With the stock recently pulling back 6.5% from recent highs, I think there’s a prime buying opportunity for those who’ve been waiting for a chance. The stock remains dirt-cheap at 8.7 times trailing price-to-earnings (P/E), especially given how well the underwriting performance has been in recent quarters.
Combined with smart investments made by Prem Watsa, I’m inclined to keep buying on weakness. If you’re a fan of Watsa and the types of (value) bets he’s been making lately (think Sleep Country Canada, or Keg Royalties Income Fund, among other smart deals made in the Canadian quick-serve restaurant scene), the stock is a solid buy, even if you’ve only got enough for a single share (that’ll run you $2,345 at the time of this writing).
Badger Infrastructure Solutions
Badger Infrastructure Solutions (TSX: BDGI) stock has been scorching hot of late, now up 25% in the past three months. Though the melt-up moment may have come and gone, I still think the firm, which provides mobile soil excavation (or daylighting) services to businesses, still has a fairly sizeable moat.
It has the fleet and is ready to cash in on any uptick in infrastructure spend. At an 18.5 times forward P/E, the mid-cap ($1.9 billion) firm stands out as one of the best deals for investors seeking an underappreciated growth story to go with a juicy dividend (1.4% yield) that’s poised to grow as earnings do. Arguably, BDGI stock is one of my favourite Canadian mid-cap gems to hold for the long haul.
Nvidia
Finally, we have AI chip leader Nvidia (NASDAQ: NVDA), which doesn’t need any sort of introduction, given its performance in the AI uprising. The stock has been a major multi-bagger in the past few years. Despite this, shares have found a way to grow into their multiple, now going for just 58.5 times trailing P/E. With Nvidia recently agreeing to take 15% off chip sales in China, I’m inclined to think the NVDA bull market still has legs.
Although NVDA stock and the rest of the semis will probably run into a vicious sell-off at some point, I do think that AI demand is robust enough to allow the run to continue for at least another year. Indeed, the nearly $4.5 trillion titan has a lot priced in here. That makes every quarter a high-stakes quarter for investors.
