Finding undervalued stocks in a market like this can seem like an impossible task. Indeed, stocks aren’t cheap, and overall valuation levels are among the highest in history.
But, as many investors will tell you, there’s always opportunity out there. Even in the most beaten-down markets, there are growth stocks that can outperform. And in markets like this, investors can still find value.
Among the top companies I think have valuations that are worth buying, here are three of my top picks heading into 2026.
Source: Getty Images
Suncor
Canadian energy giant Suncor (TSX: SU) is a company I’d argue hasn’t been cheap for a long time. Trading in the 20s–30s times earnings level for much of recent history, it’s only recently that Suncor has dropped to a level at which I’d consider it a value stock.
Now trading at just 13 times earnings, driven by robust revenue and earnings growth in past quarters, there’s something to be said about Suncor’s current positioning. As the leader in oil sands development and production, Suncor is a top stock to buy to effectively play the entire Canadian energy sector.
With a dividend yield of more than 4% and a robust balance sheet other companies are envious of, Suncor has done a great job of deleveraging and delivering more capital to shareholders. In my books, that’s a winning strategy.
No matter which direction you think commodity prices are heading, I think Suncor has the potential to win. That’s mostly because this company has one of the lowest costs per barrel for its production in Western Canada. Those are fundamentals that are very difficult to replicate.
Air Canada
As the leading Canadian airline sending millions of travellers all around the world each year, Air Canada (TSX: AC) is a company that’s as important as it is undervalued.
Still trading at less than five times forward earnings, stocks really don’t get cheaper than this. Yes, there are reasons for this depressed multiple. Airlines generally aren’t great businesses, outside of boom times. And despite the post-pandemic boom Air Canada has seen, its share price simply doesn’t seem to want to head higher.
That said, for those who think consumer spending will remain strong in the year ahead, this is a top pick of mine to consider. I’m of the view that a small allocation to Air Canada may make sense for certain cautious value investors who don’t trust much else out in the market.
Trust me, I get it.
Restaurant Brands
Parent company of Canadian favourite Tim Horton’s, Restaurant Brands (TSX: QSR) has become an absolute behemoth not only in the world of coffee and donuts, but fast food as well.
Via a string of recent acquisitions, the company has become a leading player in the QSR sector. In my view, this is among the most defensive sectors in the market, and it deserves a higher multiple. That’s because as diners trade down to lower-priced value items on menus Restaurant Brands provides, the company should take share from other fast casual and fine dining operations.
Unfortunately, this stock has been stuck in a rut. Now trading at just 12.5 times forward earnings, a multiple this company hasn’t seen in its existence up until this year (as far as I can tell), QSR stock is a screaming buy here. That’s my view, and I’m sticking to it.
