If you haven’t contributed to or invested your latest 2026 TFSA contribution, now might be a good time, even as the TSX Index starts to get hot. While it’s certainly not the cheapest time to put new money to work, I still think there are plenty of reasons to pay a fair price (or, in some cases, mild discounts) for businesses that have incredibly strong tailwinds at their back.
Of course, the bank stocks have been virtually unstoppable, and the energy names are starting to look like must-owns for their yields and impressive macro backdrops, not to mention the improving operating economics. In any case, here are three names I’d look at closely if you’re seeking out ideas in a market environment that could stay hot into the summer.
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TD Bank
The banks are in the midst of a legendary rally. And, for the most part, things are starting to get fully valued, if not a tad on the overpriced side, as overbought conditions persist. Are the banks overdue for a bit of a dip at some point?
No doubt, but underneath the surface of these heated bank stocks are some seriously impressive fundamentals. Provisions and sluggish growth are no longer the theme for the banks. If anything, the premium prices might still be worth paying, even if it means locking in a dividend yield that’s on the lower end of the five-year historical range. At the end of the day, Canada’s banks are incredibly good to own on strength as well.
For those who aren’t quite comfortable paying a price-to-earnings (P/E) multiple in the high-teens (let’s say 17–18 times), especially after that latest weekly move higher, I think TD Bank (TSX: TD) might still have plenty to offer at a 12.7 times trailing P/E. Shares are melting up, just like the Big Six. But I simply think there’s more room to close the gap as TD Bank starts to show it can keep the growth going strong, even if it means less growth runway in the U.S., thanks to money-laundering woes under the previous CEO.
What’s most impressive about TD, in my view, is its potential to power its long-term growth profile with applied AI. TD Bank recently pulled the curtain on an AI model for mortgage applications. That’s impressive in itself, but this feature may very well just be the start, as the bank considers other corners of banking where AI could help save customers big time and money. The only thing more powerful than a favourable banking environment is one that coincides with a technological boom.
Is TD Bank an underpriced name that deserves to trade more like a play on applied AI? Perhaps a more blended multiple would make sense.
Either way, if you’re still looking for a bank on the cheap, I think TD Bank still has a lot to offer, as shares look to extend their recent winning streak. The only disappointing thing about TD stock right here is that the yield has fallen to 2.8%. If you haven’t checked out the name in a while, it might come as a bit of a shocker. Either way, TD Bank is a dividend growth rockstar that likely has more appreciation to offer as the bank bull market makes its next move.
Is the name worth plowing a whole $7,000 into in one go?
While TD stands out as real relative value, I’d look to average into a position over time because those near-term pullbacks could hit at any time, and investors should be ready to embrace such declines. So, in short, fundamentally outstanding, but technically hot, perhaps too hot to buy in one sitting.
