The TSX Composite Index of stocks is soaring in 2025. It is up 19.6% this year! The Index could hit a record 30,000 points (today, it is 29,450) if momentum keeps driving TSX stocks.
Yet, the market does seem a bit frothy, especially given all the geopolitical, economic, and trade uncertainty in the world. It is not unusual for stocks to correct in the second half of the year.
If you have some cash, you might want to be patient and wait for a pullback to deploy it. If there is another major pullback, here are two TSX stocks I’d consider buying.
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A top Canadian bank to add on pullbacks
Royal Bank of Canada (TSX:RY) has been an excellent investment for conservative investors. Royal Bank is the largest stock on the TSX with a market cap of $284 billion. It is, hands down, one of Canada’s best-run banks.
However, the stock is up 16.5% this year. Its trailing price-to-earnings (P/E) ratio is sitting at 15.25, which is near the top of its 10-year valuation range. Likewise, its dividend of 3% is near its lowest yield in the past decade.
Royal has executed its strategy very well. It has a strong balance sheet, a top management team, and a great franchise across the country. It is very likely to continue outperforming banking peers. However, I wouldn’t want to buy it at peak valuations.
Bank stock performance tends to correlate closely with the broader Index. Bank stocks are very economically sensitive. Given there are signs of a weakening economy in Canada, I would wait for a broader market pullback to start building a position in this TSX stock.
A top TSX stock for a global infrastructure boom
WSP Global (TSX:WSP) has been an amazing Canadian compounder over the years. Its stock is up 236% in the past five years and 508% in the past 10 years! If you look at its stock chart, it has moved with an incredible “up-and-to-the-right” pattern.
Today, this TSX stock trades with a P/E ratio of 46. That is above its 10-year average of 37. Likewise, it has an enterprise value-to-earnings before interest, tax, depreciation, and amortization ratio (a better valuation metric for WSP) of 21.45, which is above its 10-year average of 17.
Now, one could make the argument that its business is significantly better today than it was 10 years ago. This could somewhat justify the higher valuation. Margins have seriously improved in that time. The company’s growth-by-acquisition strategy has proved very effective in expanding its service categories and global geographic exposure.
With its stock up 14% this year, I would just wait for a pullback to start building a new position. WSP is a great business with long-term tailwinds (aging infrastructure, data centre growth, rising power consumption, climate change, and urbanization) supporting its growth story. However, with this TSX stock just off all-time highs, I would prefer to add to it on a dip or a pullback.
