As the TSX Index looks to stay hot while Canadian investors become hopeful for a bit of a Santa Claus rally to close off what’s been an incredible year, it might be worth checking in with some of the high-momentum names that have what it takes to keep the strength going through the new year. Of course, chasing momentum without paying even closer attention to the valuation could be met with quick losses. So, investors should have a game plan in case momentum runs out of steam and a Santa rally ends up nowhere in sight.
Undoubtedly, there’s a good chance that November volatility could carry over into December. And with a rather turbulent start to the month, with the TSX Index slipping just under 1% after finishing November with a nice bounce, investors should be prepared to deal with increased volatility, as it may very well be the new norm as investors weigh Fed (and Bank of Canada) rate cuts while trying to find the right premium to place on the AI trade.
In any case, here are three stocks showing considerable momentum and few signs of slowing despite recent winter choppiness. As to whether they’ll rise up in a Santa rally remains the big question. Either way, long-term investors should focus on the next three to five years, rather than the month ahead, because that’s where the greatest appreciation potential lies for the following companies, at least in my view.
So, if you’ve got the horizon to let the multi-year growth stories play out, the following pair seems worthy of picking up, even if they’re an inch or so away from their all-time highs!
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Royal Bank of Canada
The big banks are running hot going into quarterly earnings season, and while some doubt that Canada’s top financials can keep running at full speed now that analysts expect a bit more from the Big Six, I’d be more inclined to stick with the names, even though there is a reasonably high chance of a near-term pullback.
The banks have been red-hot, and, arguably, Royal Bank of Canada (TSX: RY) shares have been the hottest, with shares gaining more than 22% in the past six months. Of course, 16.2 times trailing price to earnings (P/E) is a bit of a hefty premium to pay for a bank stock. However, if there’s a bank that deserves such a premium, it’s Royal Bank, which recently broke the $300 billion market cap mark for the first time. The 2.85% dividend yield is quite low as far as banks are concerned.
But if you want steadiness through all sorts of economic conditions, I’d not be afraid to buy a small position here and now after a potential pullback. Personally, I’d look for the $180 range to accumulate even more shares if you’re inclined to start buying after last month’s solid bounce.
Kinross Gold
What’s hotter than the bank stock of late? The gold miners have been really making up for lost time, and Kinross Gold (TSX: K) stands out as one of my favourite names right here, primarily because of its reasonable multiple. The $48.4 billion miner has been swimming in cash, and there’s a good chance that the cash flows could keep coming in as gold prices continue marching higher while Kinross continues producing at a high level.
The stock has already gained over 22% in the past month, and more than 178% year to date. Is it a tad overheated as shares hit new highs close to $40 per share? Most definitely. But there’s a very good reason the name is picking up traction. Given its growth prospects in the new year and the still modest 12.6 times forward P/E, I’d not shy away from the name if you’re looking to pick up a miner before the year’s close.
