As an investor, it’s your job to invest with the future in mind. The next year or two matter more than the last year. That’s not to say that you shouldn’t have a brief look at the past-year chart, though.
In some cases, a red-hot parabolic mover might “look” cheap on the surface, but the recent wave of momentum might suggest otherwise, especially if we’re talking about a company that tends to over-earn in cycles while underearning when times get tougher, and the cyclical downturn starts to weigh. In any case, let’s have a look at two of the recent picks that I touted last year and how they’ve performed since. Of course, past performance ought to be an afterthought.
Though, I do think how the fundamentals and growth narrative have shifted (alongside the valuation) are remarkable. So, without further ado, let’s check in on a pair which, in my opinion, still stand out as great buys despite their past year of decent results.
man withdraws money from ATM
TD Bank
TD Bank (TSX: TD) stock has been hot of late, to say the least, with shares up more than 26% year to date. In the past year, the $271 billion bank stock has been up just over 70%. That’s massive. But around a year and a half ago, the stock was a tough hold, let alone a tempting buy. Indeed, the banks were coming off a bit of a multi-year slump, and TD Bank in particular had its own fair share of company-specific woes related to that prior money-laundering fiasco.
Indeed, that news may have been old, but it weighed down the stock for quite some time. The fading growth runway in the U.S. was enough reason to steer clear of the name. Arguably, things were too bearish, and investors were lost in past woes that were already priced in, at least that was my view at the time.
Fast forward to today, and all is well for TD Bank. It’s in a favourable macro climate, and the AI gains might not be all too far off. With a new CEO, a new trajectory, and momentum, I still see TD Bank stock as a great pick, even though the valuation has climbed (19.3 times trailing price-to-earnings (P/E)) while the yield has plunged below 3% to 2.8%. In my view, TD was always a great bank; it’s just now getting the respect it deserves. But that’s no reason to ring the register.
Fairfax Financial Holdings
Fairfax Financial Holdings (TSX: FFH) is a name I’ve pounded the table on pretty consistently since the COVID pandemic began. Shares have soared over 317% in the past five years in an explosive rally, but have since slowed their pace, going flat (down around 3%) in the past year. If anything, the year of sluggish action seems to have granted investors an opportunity to get shares of a great firm at a better price.
At 8 times trailing P/E, the name looks like a deep-value play that still has legs as industry tailwinds remain, while the firm does its best to improve everything under its control. Combined with smart investments and Prem Watsa’s leadership, FFH stock looks like a fantastic deal.
