With so many investors looking at their portfolios and seeing massive gains in recent years, some may be looking to rebalance or rotate out of certain high-flying areas. Of course, the long-term investing mantra of letting one’s winners run is a strategy that’s worked spectacularly well of late. But at some point, undervalued stocks tend to see their performance converge with growth stocks, particularly if investors become increasingly concerned about the overall macro backdrop.
We’re clearly not in such a situation just yet, with many growth stocks continuing to outperform. But I think a reckoning is likely coming for investors who have taken too much risk.
For those on the more defensive end of the risk spectrum, here are two value stocks I think are screaming buys in November.
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Suncor Energy
Shares of one of Canada’s largest and most dominant energy producers, Suncor Energy (TSX: SU), have been on a bumpy ride over the past five years.
Of course, a great deal of this volatility has been driven by commodity prices, which have gone all over the place. When Western Canadian Select (the price of oil producers like Suncor receive) last hit $100 per barrel in 2022, Suncor’s share price surged to what was a multi-year high at the time, around $45 per share.
However, investors will note that at around $50 per barrel for Western Canadian Select (where these prices are right now), Suncor’s share price is materially higher, at around $60 per barrel. This indicates that investors view the company (and its low breakeven price per barrel) as a more mature and stable business than back in the pandemic-driven era of volatility we saw play out.
If you’re a long-term investor looking for a stable dividend stock trading at a very reasonable valuation relative to its earnings potential, Suncor and its multiple of 14 times earnings looks cheap to me right now.
Toronto-Dominion Bank
Despite surging nearly 50% over the course of the past year, shares of Toronto-Dominion Bank (TSX: TD) still trade at rock-bottom prices.
With a price-to-earnings ratio below 10 times, investors are suggesting that TD Bank’s recent move higher may not be warranted. Indeed, if this stock maintained its historical multiple of around 12 times, there’s 20% implied upside to be had here if this company reverts toward its longer-term average.
I think such a move is likely, considering TD’s strong market share in its core Canadian and U.S. markets, as well as its growth potential and value as a dividend stock. With a current yield of 3.7%, TD’s total return potential in the world of Canadian stocks looks unparalleled. This remains one of my top picks for these reasons.
