It’s hard to pick which Canadian companies are really the best to hold in a TFSA (Tax-Free Savings Account) or even an RRSP (Registered Retirement Savings Plan) for many decades. After a strong 2025 for the Canadian market, there are many hot contenders that might be worth buying and stashing away for a shot at outsized growth. And while valuations might be on the higher end for various 2025 performers, I do see such premiums as still worth paying, given how fast the fundamentals have improved.
If the growth narrative and fundamental picture have risen by more than the price of admission, perhaps it’s still worth buying a stock while it’s close to its all-time highs. Of course, there is a stark difference between chasing the hot momentum stocks in search of a quick gain and increasing one’s position in a top performer with the intent of holding on for the next five years or longer.
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Can hot stocks still be undervalued? Or is that just a justification to chase momentum?
In today’s hot market environment, chasing hot stocks could grant you a front-row seat to the next big sell-off. And the broad TSX Index doesn’t even need to lead the way lower for your investment to sour in a hurry. That’s why the stock chart shouldn’t concern you nearly as much as the fundamental story at hand.
Indeed, when a good long-term story goes bad due to some noisy near-term event, the best opportunities tend to arise for those willing to go against the grain as a contrarian. These days, it’s becoming tough to get steep dips in the most cherished names that only seem to know how to march higher.
Take the Big Six Canadian banks as an example of a red-hot class of stocks that seemingly can’t be stopped. They’re not giving investors much of a chance to top up either, given the sheer momentum behind the names. While valuations have climbed, I think the growth story has improved enough that some of the big banks might still be worth buying as they look to make even higher highs in 2026.
TD Bank stock: It’s still ridiculously cheap after a 70% past-year surge!
As we go into mid-January, TD Bank (TSX: TD) still stands out as a great option despite gaining more than 30% in the last six months or just shy of 70% in the past year. Undoubtedly, TD went from heavily out of favour to being one of the most overbought names in the Canadian financial scene. Even at more than $130 per share, I like the stock and the price of admission.
Arguably, the fundamental improvements have outpaced the share price gains, with the name going for 11.3 times trailing price-to-earnings (P/E). That’s still cheap, and far cheaper than many of its rivals in the banking basket. Though TD Bank faces unique hurdles in the U.S. market that could limit growth, there is a world of other pathways the premier bank can take as it continues its comeback.
With a strong slate of new managers and the same industry tailwinds as its pricier peers in the Big Six, I’d not be afraid to keep adding to a position in shares of TD, even as the dividend yield shrinks below 3.3%.
