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Amazingly, we’re coming into the home stretch for calendar year 2025. Time flies, and all that stuff.
The stock market in 2025 has been a story of haves and have-nots — a dynamic that surprisingly exists in both the Canadian and U.S. markets.
Gold has driven the Canadian market, while the “Mag 7” is responsible for the bulk of U.S. market gains.
Looking under the hood, the S&P/TSX Composite was up 22.4% year to date as of November 3.
But 121 companies (out of 211), or 57% of index constituents, have underperformed the market. Almost one in four had booked a negative return since the calendar turned.
The situation is more dramatic in the United States. The S&P 500 was up 16.5% year to date on November 3. Strikingly, 360 companies — that’s 72% of the index — have underperformed that bogey. And 45% of the companies in the index had booked a negative return for the year so far — almost half of them!
Now, to fully flesh this out, we’d want to look at how these figures compare to the rest of market history, but that goes beyond what I’m trying to get at.
You see, suffice to say, what we’ve been dealing with is what’s known as a lack of market breadth. A few corners of the market where the sun has been shining have done very well. But that sunshine has been relegated to a select few corners. Cloud cover has been locked in elsewhere, to the detriment of stock prices.
Where this leaves us is that even though from a business standpoint many of the companies we love have performed very nicely, multiple contraction has been rampant.
And while this is the kind of scenario that’s annoyingly painful in the moment, it’s actually very well received with a longer-term outlook in mind. After all, buying a company at 40 times earnings, for instance, and buying that same company at 25 times earnings generates two very different outcomes — one better than the other.
We’ve come upon a lot of companies trading at a metaphorical 40 times earnings in recent years. 2025 has kindly turned many of them into 25 times earnings situations.
Now, you’re about to meet a few of our favourite businesses that haven’t appeared this ripe for the picking in quite some time.
Thanks, 2025!
Foolishly yours,
Iain Butler
Advisor, Stock Advisor Canada
“Best Buys Now” Pick #1:
Intact Financial (TSX: IFC)
Intact Financial (TSX: IFC) is one of Canada’s best stocks, though seldom does it provide us the opportunity to boldly proclaim, “Buy Intact, now!”
The reason being, the stock price has been on a nearly constant upward trajectory since we starting looking at it. Not that there’s really been a bad time to pick up shares of Intact. It’s just that we Fools are wired to pound the table on a company like this during a pullback.
Consider Intact’s record of growing book value per share. Canada’s largest property and casualty insurer has grown this figure at ~10% per year since we started watching it, and given the consistency with which it’s accomplished this rate, we think it serves as a solid guess of what’s to come.
Tack on a dividend yield of 2% at the current payout — which we expect to grow — and you’re looking at a tidy baseline return of 12% or so from this company.
Where the total return situation has given us pause in the past is when Intact’s multiple trades north of 2.5 times book value. As recently as May 2025, this multiple stood as high as 3.25 times, but thanks to the broadly experienced multiple contraction I mentioned above, we’re back to being asked to pay about 2.6 times book value for Intact today.
While multiple expansion from here fits more in the nice-to-have category than something we’d expect, we’re still looking at a very high-quality company that at least shouldn’t have a multiple-related headwind combating the underlying company growth Intact is bound to achieve.
If you’re looking to sleep well, buy some shares of Intact at the current price and tuck them under your pillow. The longer they remain there, the better.
