One of the trends I think is most interesting to explore right now is the potential for a shakeup in the global equities market. After years of what many have called “U.S. exceptionalism” in the stock market, investors appear to increasingly be taking the view that other global markets could be better long-term bets.
There’s a solid valuation argument to be made on this front. With the U.S. stock market now trading at elevated forward multiples (and, on some metrics, could be the most overvalued ever), finding other markets where stocks are more favourably valued may make sense.
I’d also argue that markets such as Canada, which provide investors with the kind of under-the-radar growth opportunities that are hard to find in other, more visible markets, may be the way to go.
Here are two Canadian stocks which could be examples of this trend.
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Toronto-Dominion Bank
The Canadian banking sector is boring, and that’s how some investors like it. Shares of Toronto-Dominion Bank (TSX: TD) have been on a tear of late, as other regional banks and financial companies in the U.S. take a breather.
I’d argue that some of this strong demand for Canadian banks stems from these companies’ relative balance sheet strength, as well as the more stringent regulatory environment in Canada relative to other markets. During the Great Financial Crisis (GFC), Canadian banks really outperformed their global peers. Those seeking exposure to this sector looked to companies with solid footing and balance sheets, which Canadian lenders like TD provided.
With a dividend yield of 3.7% and a solid long-term total return profile that would make most investors salivate, TD stock remains one of my top dividend stock picks in the market right now for Canadian (and global) investors.
The Metals Company
Among the Canadian small-cap stocks I continue to pound the table on, The Metals Company (NASDAQ: TMC) is one Vancouver-based company I think could drive massive long-term returns for investors willing to move out on the risk spectrum.
This deep sea mining company has seen robust share price growth, as investors look to play an increasingly hot market for rare earth minerals.
The cobalt, nickel, lithium and other minerals TMC and other companies are looking to mine via sucking up nodules of such metals on the ocean floor could be a trillion-dollar opportunity over the long term. As a first mover in what could be a very profitable sector, investors are looking at the geopolitical environment right now and trying to position their portfolios accordingly.
I think TMC is one of the rare batch of Canadian small caps that could really outperform in the years to come. And despite this stock’s recent rise, I’d still argue TMC is one company that’s flying under the radar for most investors right now.
Those looking for innovation and growth outside the U.S. market may want to have a look at companies like TMC. And those looking to bolster their portfolio from a defensive angle can look at TD or a number of other Canadian stocks with similar characteristics.
