When it comes to the investing world, very few people have the aptitude of Warren Buffett. Based on a principle known as value investing, Warren Buffett’s strategy is to find undervalued companies in industries he understands that he intends on buying and holding indefinitely.

At the centre of Warren Buffett’s approach are three main philosophies that I will share with you.

Understand the businesses you invest in

Warren Buffett has been quoted saying, “Never invest in a business you cannot understand.” The crux of this argument lies in the fact that investors are able to make better decisions in industries they know well.

Warren Buffett himself practices what he preaches with his company, Berkshire Hathaway, owning companies such as Dairy Queen and Fruit of the Loom. Dairy Queen is a fast-food restaurant that specializes in hamburgers and ice cream. Fruit of the Loom is an American company that manufactures clothing, with a focus on underwear and sports equipment.

In terms of Canadian stocks, Warren Buffett would be interested in the likes of Sleep Country, which engages in the retail and online sales of mattresses. Sleep Country owns Endy, an online mattress-in-a-box company. Based on my calculations using a discounted cash flow model, I determined Sleep Country has an intrinsic value of $24.23 per share, which is a premium to the $20.49 at the time of writing.

Plan to buy and hold stocks forever

When it comes to the time horizon for investing, Warren Buffett makes a good point. “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”

The main point of this argument centres on discipline. The best investors are usually the most patient and can invest without emotion. I remember reading an article on Warren Buffett whereby he mentioned the best way to approach investing is to analyze a company as if you were to buy it. If the company is not attractive enough to buy, then it is not attractive enough to invest.

Using this approach, I am bullish on Fire & Flower. The company engages in the retail sale of marijuana and marijuana related products. It is backed by an investment from Couche-Tard of $26 million for a 9.9% stake in the company. This gives it an implicit value of $2.16 per share.

Price and value are not the same

This is arguably the most important distinction to make when it comes to investing. Warren Buffett makes a very good point about price and value. “Price is what you pay. Value is what you get.”

I couldn’t have said it better myself. This is one of the key philosophies behind intrinsic value for value investors. By using valuation methods such as discounted cash flow, comparable company analysis, and precedent company analysis, investors can determine the present value of a business.

I am a proponent of value investing, and through this method, I calculated that Recipe Unlimited is currently undervalued. With an intrinsic value of $97.83 compared to the price at writing of $18.83, Recipe Unlimited has the potential to deliver significant returns to its investors. The company was formerly called Cara Operations, and its brands include The Keg, Milestones, and Bier Markt to list but a few.

The post TFSA Investors: 3 Pointers From Legendary Warren Buffett appeared first on The Motley Fool Canada.

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The companies I am referring to are Kinross (TSX:K)(NYSE:KGC) and Metro (TSX:MRU).

Kinross Gold Corporation

Kinross is engaged in gold mining and related activities, which includes the exploration and acquisition of gold-bearing properties, extraction and processing of gold-containing ore and reclamation of gold mining properties. Production and exploration are carried out principally in Canada, the United States, Russia, Brazil Chile, Ghana and Mauritania.

Gold has had a bad reputation for the better part of the decade, with a decline in prices from the high US$1800 an ounce in late 2011, to the trough of US$1100 in late 2015.

That said, gold prices are recovering with the latest price of US$1600 an ounce. As gold prices increase, investors in Kinross stand to benefit.

The reason why I like Kinross is its valuation. Using a precedent transaction model, that determines the value of companies based on past acquisitions of companies in the same industry, I determined that Kinross has an intrinsic value of $14.33 compared to its current share price of $5.90.

Kinross stands out to me among the other gold producers because it has very little debt relative to its revenues and is increasingly efficient, with the cost of revenue declining from $4.1 billion in fiscal 2014 to $2.6 billion in fiscal 2018.

Metro Inc.

Metro is a leading grocery and drugstore company in Canada with stores in Quebec and Ontario. Its banners include Metro, Food Basics, Adonis, Metro Pharmacy, Drug Basics and the recently acquired Jean Coutu.

The company acquired Jean Coutu in May 2018 for $4.5 billion for a combination of cash and Metro shares. The combined entity is expected to achieve revenues of $16 billion.

Based on this acquisition, I believe Metro has an intrinsic value of $148.51 per share, which is a premium to the $54.36 per share at the time of writing.

From a qualitative point of view, this increases Metro’s competitiveness, putting the company on par with Loblaw, which owns Shoppers’ Drug Mart.

The acquisitions also allows Metro and Jean-Coutu to cross-sell products, which will increase revenues. Loblaw successfully uses this strategy with its President’s Choice label. Canadians can find President’s Choice branded ready-to-eat meals and shelf products in Shoppers Drug Mart locations across the country.

Foolish takeaway

It’s been said that gold is a hedge against a declining market and consumer staples are recession-proof, which is largely true. As the Dow Jones Industrial Average reaches new heights, there’s an underlying sentiment of fear that can’t be ignored. TFSA and RRSP investors looking for solid companies to buy and hold should consider Kinross and Metro.

As a reputable gold producer, Kinross was founded in 1993 and engages in both silver and gold production. My calculations using a precedent transaction model determine that Kinross is substantially undervalued compared to its peers.

As a grocery conglomerate, Metro is a stable choice that could deliver stellar returns. With the recent acquisition of Jean-Coutu, Metro has increased its footprint in Canada, allowing it to go head-to-head with Loblaw.

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In an interview with CNBC, O’Leary gives practical advice on saving and investing. “When you make money, I don’t care if it’s a gift for your birthday present, or you have a job on the side, or you’re scooping ice cream, or whatever it is — you have to take 10% of your paycheck every two weeks and invest it.”

To further this train of thought, I believe that the reason why people are not wealthy is due to a lack of discipline, not a lack of money. O’Leary bolsters this argument by saying that he would never spend $2.50 on a cup of coffee as it costs $0.20 to make.

You may be wondering how this can be applied to your life. I will be sharing some of my saving strategies coupled with a stock recommendation.

Saving is the name of the game

I used to be a terrible saver. I was so bad that my picture could have been easily placed next to the definition of “frivolous spender.” Many years later, I have honed a technique of discipline that has allowed me to enjoy a high quality of life while saving for the future.

The way I achieve this is through an automatic savings plan. An automatic savings plan withdraws money from your chequing or savings account and moves it to another account that you set up. The goal of this is to reduce the amount of discretionary money in your account so you don’t make frivolous purchases. One bank that offers this service is Tangerine.

Depending on your financial situation, 10% savings should be the minimum with higher percentages being preferred. Further to this, I recommend coming up with financial goals to incentivize you to save. One method I use is the visualization method, whereby I draw a picture of my goal and a winding path leading up to it. I divide the winding path into increments of $50, and every time I save $50, I colour in one of the sections.

A stock to invest in

Park Lawn (TSX:PLC) provides goods and services associated with the disposition and memorialization of remains in Canada and the United States. The company owns and operates cemeteries, crematoriums, and funeral homes, and funeral services business. The United States accounts for the majority of its revenue.

The reason why I like Park Lawn is because the industry is growing and the company is financially solid. As the population in Canada and the United States ages, there will be an increase in the number of deaths each year. As such, there will be an increase in demand for Park Lawn’s services

From a financial perspective, total revenues have increased from $67 million in fiscal 2016 to $161 million in fiscal 2018. This is complemented by flat but consistent net income of $7.5 million in fiscal 2016, $4.2 million in fiscal 2017, and $6.7 million in fiscal 2018.

Foolish takeaway

With an automatic savings plan, you will be able to set aside a portion of your earnings without the inevitable internal struggle of deciding how much and how willing you are to save. This coupled with an investment in a company such as Park Lawn will allow TFSA and RRSP investors to effectively save money for financial goals.

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As a value investor, I use intrinsic value to determine which stocks to invest in. Firstly, I identify industries with a potential to deliver decent returns. Secondly, I screen stocks based on increasing revenues and profitability. Finally, I use some method of valuation (discounted cash flow, comparable company analysis, and fundamental analysis) to determine the intrinsic value.

Based on my research, one stock I would buy today is Yangarra (TSX:YGR), one stock I would hold is North West (TSX:NWC), and one stock I would sell is National Bank.

Yangarra Resources

Yangarra is a junior oil and gas company engaged in the exploration, development, and production of natural gas and oil with operations in Western Canada.

The reason why I like Yangarra is because of the oil and gas industry. Investors that have been following the news will know that oil and gas has suffered in the past few years due to depressed oil and gas prices. At its trough, Western Canada Select (a Canadian benchmark for oil prices) traded at US$5.97 per barrel. As a comparison, one of the largest benchmark indexes in the United States, West Texas Intermediate, was trading at US$49.52 per barrel at that time.

As curtailment policies were introduced in Alberta to curb production, oil prices steadily increased over the years and Western Canada Select is currently at US$31.29 per barrel. As investor funds shifts away from the oil and gas industry in the United States, companies in Canada stand to benefit immensely.

North West Company

North West is a Canada-based company that is principally engaged in retail business in underserved rural communities and urban neighborhoods. The company offers a variety of products, with food products accounting for the majority of the company’s revenue.

The reason why I am assigning North West a hold rating is because its revenues are relatively flat in the past two fiscal years, which suggests that growth is slowing. In fiscal 2018, the company reported revenues of $1.954 billion and in fiscal 2019, the company reported revenues of $2.013 billion.

Despite the negligible increase in revenues, net income is up materially from $67 million in fiscal 2018 to $87 million in 2019. This is driven by increased operational efficiency. Unfortunately, a company can only make so many changes to its operations before it hurts the bottom line. Until North West shows signs of increased revenue growth, it is a hold for me.

National Bank of Canada

From a financial statement point of view, National Bank is doing well with positive retained earnings (cumulative net income minus cumulative net loss) with an increase in credit loss provisions of 3% compared to double-digit increases for other banks. Credit loss provisions represent the value of defaults the bank anticipates in the following fiscal year.

My hesitance to invest in National Bank is due to its enterprise value-over-revenue (EV/R) ratio, a common statistic used to value a business. National Bank reports an EV/R ratio of four times in fiscal 2018 compared to the median of 3.3 times. This results in an intrinsic value of $52.06 compared to the value at writing of $71.50.

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Goodfood Market

Goodfood (TSX:FOOD) is a Canadian meal kit company domiciled in Montreal. Subscribers have the option of selecting recipes online and choosing the frequency and quantity of the delivery. Founded in 2014, the company has grown its subscriber count exponentially year over year and reported 230,000 subscribers as at November 30, 2019.

The reason I like Goodfood is because of its business model and its financial wherewithal. As society becomes increasingly busy, people are looking for ways to reduce the time it takes to do day-to-day tasks such as cooking, cleaning, and shopping. With the invention of the iRobot for cleaning, and the likes of Amazon and Metro for household and grocery delivery, Goodfood fills the need for a simplified approach to cooking delivered to your door.

Goodfood’s financials are supportive of my bullish position with a growth in revenues from $20 million in fiscal 2017 to $161 million in fiscal 2019 (compounded annual growth rate of 100%). Evidently, the company is losing money, with a $21 million loss in fiscal 2019; however, this is not unusual for companies in the growth phase of the business cycle. I firmly believe that Goodfood is on a path to profitability and encourage investors to consider the company as a growth investment.

Bank of Montreal

BMO (TSX:BMO)(NYSE:BMO) is a diversified financial services provider domiciled in Montreal, Quebec. It provides a range of services, including personal and commercial banking, wealth management, and investment banking products and services. As at fiscal year-end 2019, the bank reported assets of $852 billion.

The reason why I like Bank of Montreal the most out of the Big Five Canadian banks is its valuation. I recently wrote an article on BMO, raving about its intrinsic price. At the time of writing, BMO was trading at $100.52 compared to its intrinsic value of $176.08. Based on the model I used, I believe BMO is undervalued by 76%.

Aside from its potential for capital gains, the real value of BMO is its dividend yield at 4.08%. In the investing world, it is widely regarded that banks are some of the safest equity investments on the stock market. This is true. Investors that buy shares of BMO for its dividend can rest assured that the bank will continue to pay dividends, even during financially challenging years.

Foolish takeaway

So, there you have it, folks: two strong TSX stocks to add to your TFSA or RRSP portfolio. Goodfood is new to the TSX, but there is every indication that as it continues to grow, its subscriber count and increase revenues, it will eventually deliver generous returns to shareholders. BMO is a TSX veteran and its history of paying dividends should give investors assurance that future dividends will be honoured.

Goodfood and BMO make a very good pair, as Goodfood is a growth stock that has the potential to offer triple-digit returns, while BMO is a steady stock that provides investors income for as long as it is held.

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You may be wondering why I haven’t closed my positions yet. That’s because I use a value approach to investing, whereby I buy and hold stocks for years –and potentially decades.

For those of you who take a more speculative approach to investing, you may be worried about how the coronavirus will affect your portfolio. Truth be told, it could be very detrimental.

The economics of the coronavirus

While the threat of being infected by the coronavirus in Canada remains very low, my concern is the impact it is having on the Chinese economy, which is a primary purchaser of Canadian raw materials.

The BBC recently reported that Chinese companies are telling its workers to stay at home. The article goes on to report that the government of the city of Suzhou (a major manufacturing hub) has closed all businesses until at least February 8. At the current rate of transmissibility, more cities have the potential to follow suit.

According to the Government of Canada, China represented our second-largest source for exports in 2018 with $29 billion of goods delivered to the country.

Even a 10% reduction in exports (amounting to $2.9 billion) would have a material impact on Canada’s economy, potentially enough to trigger a domino effect leading to a recession.

Given the fragility of Canada’s commodity and oil and gas sector, we simply can’t afford a reduction in demand. Investors holding stocks in these industries (myself included) are particularly vulnerable.

Many natural resource and commodity companies list China as a top customer, which means share prices have the potential to drop significantly.

If you’re currently holding shares in natural resource or commodity stocks, I recommend you don’t sell. Rather, wait until the price is low enough and have some money set aside to buy in and average down.

That said, I am assuming the companies you invested in are financially sound and it is not pure speculation. Given that it is the latter, you may want to reconsider holding the stock.

Investing during the coronavirus outbreak

Interestingly, one of the best times to invest in stocks are during times of crisis. Take the 2008-2009 recession as an example whereby the Dow Jones Industrial Average and S&P 500 posted double-digit declines. Admittedly, some companies deserved the correction in its valuation; however, those that were financially sound started trading at a discount.

Thus, I don’t recommend investors avoid the stock market during this time. Rather, I would suggest setting aside some money in your TFSA or RRSP and finding companies with solid financials to invest in. Follow the stock and wait for an opportunity to buy in at a discount to current prices.

One stock I would recommend to follow through 2020 is Aritzia (TSX:ATZ). This underrated stock has performed well in an industry that is struggling to stay afloat.

The company reports year-over-year increases in revenues coupled with a 60% unused credit facility, giving it ample liquidity to grow and deliver value to investors.

Foolish takeaway

In the wise words of Warren Buffett, it is better to be “fearful when others are greedy and greedy when others are fearful.” I will leave you investors with this quote to ponder. Fool on!

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Kinross’ production and exploration is carried out principally in Canada, the United States, Russia, Brazil Chile, Ghana and Mauritania. Kinross reports a market capitalization of $7.4 billion, with a 52-week low of $4.04 and a 52-week high of $7.24.

Intrinsic price

Based on my calculations, using a precedent transaction model, I determined that Kinross has an intrinsic value of $14.33 per share. The precedent transaction model was created with data on the acquisitions of Goldcorp, Randgold and Detour Gold.

At the current share price of $5.90, I believe Kinross is significantly undervalued. Investors willing to assume a bit more risk and are looking to add a gold producer to their RRSP or TFSA should consider buying shares of Kinross.

Kinross has an implied enterprise value of $18 billion, which represents the theoretical price a buyer would pay for all of Kinross’s outstanding shares plus its debt. This includes a 3% median premium that buyers have been paying for target companies in the gold industry.

Financial highlights

For the nine months ended September 30, 2019, the company reports a poor, but improving balance sheet with negative retained earnings of US$10.35 billion, up from negative US$10.55 billion as at December 31, 2018.

This is not ideal for investors as it suggests the company has more years of cumulative net loss than net income.

Given shareholders’ equity of US$4.8 billion, goodwill of US$159 million and nil intangibles, the company reports tangible net worth of US$4.6 billion. This is a good sign as tangible net worth refers to the real value of a company.

Total revenues are up slightly to US$2.5 billion, from US$2.4 billion the prior year (+3%) complemented by more efficient production (9% reduction in COGS year over year) for pre-tax income of US$357 million, up from US$116 million in 2018 (+209%).

From a cash flow perspective, the company reports operating cash flows (net income plus DD&A) of US$717 million, up from US$591 million in 2018.

Management takes a proactive approach to debt management, as evidenced by a US$200 million repayment of debt, up from an US$80 million repayment in 2018. This is offset by the issuance and debt of US$300 million in 2019, up from US$80 million in 2018.

The company’s acquisition spending slowed down during 2019 to US$30 million, from US$289 million in 2018. Despite this, capital expenditure spending is up to US$807 million, from US$770 million, indicating that the company is investing in itself.

Foolish takeaway

Investors looking to buy shares of a gold producer should consider buying shares of Kinross. Despite its negative retained earnings, it reports increasing revenues and has an adept management team keen on reducing its debt and growing the business.

Using a precedent transaction model, I determined Kinross’s intrinsic value to be $14.33, which represents a steep premium to the $5.90 at which it is currently trading.

While I commend Kinross on increasing its operational efficiency, as suggested by the decrease in COGS year-over-year, I would like to see management be a bit more selective about how it spends money in order to reduce the substantial negative retained earnings.

Overall, TFSA and RRSP investors that are willing to take on a bit more risk will be generously rewarded by investing in Kinross.

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Yamana is a Canadian-based gold, silver, and copper producer with a portfolio of operating mines, development state projects, and exploration and mineral properties throughout the Americas.

The company operates mainly in Canada, Brazil, Chile, and Argentina. Yamana reports a market capitalization of $4.63 billion, with a 52-week low of $2.41 and a 52-week high of $5.24.

Intrinsic price

Based on my calculations, using a precedent transaction model, I determined that Yamana has an intrinsic value of $9.73 per share. The precedent transaction model was created with data on the acquisitions of Goldcorp, Randgold, and Detour Gold.

At the current share price of $4.87, I believe Yamana is significantly undervalued. Investors looking to add an intermediate gold producer to their RRSP or TFSA should consider buying shares of Yamana.

Yamana has an implied enterprise value of $10.9 billion, which represents the theoretical price a buyer would pay for all of Yamana’s outstanding shares plus its debt. This includes a 3% median premium that buyers have been paying for target companies in the gold industry.

Financial highlights

For the nine months ended September 30, 2019, the company reported a poor, but improving balance sheet with US$3.46 billion in negative retained earnings, up from negative US$3.65 billion as at December 31, 2018.

This is not a good sign for investors, as it indicates the company has had more years of cumulative net loss than net income.

Given shareholders’ equity of US$4.2 billion and goodwill and intangibles of US$394 million, the company reported a tangible net worth of US$3.8 billion. This is a good sign for investors, as tangible net worth is widely regarded as the real value of a company.

Total revenues are down slightly to US$1.2 billion from US$1.3 billion in 2018 (-7%) driven by a US$94 million decline in sales in the copper segment. Pre-tax earnings were up to US$269 million from negative US$168 million in 2018, driven by a US$228 million gain relating to the sale of its Chapada mine.

The company reported operating cash flows (net income + depreciation, depletion, and amortization) of US$621 million, up from US$139 million in 2018. Management takes an acquisition-centric approach to growth, as indicated by acquisitions amounting to US$246 million in 2019 and US$339 million in 2018.

Further, management is keen on keepings its debt in check, as indicated by a US$951 million pay-down of term loans in 2019 and a US$442 million pay-down in 2018. This is slightly offset by proceeds from term loans amounting to US$240 million in 2019 and US$435 million in 2018.

The company is a dividend-paying entity with a dividend yield of 1.07%, which is achieved through quarterly payments of US$0.01 per share.

Foolish takeaway

Investors looking to buy shares of a gold producer should consider buying shares of Yamana. Despite its negative retained earnings and decreased revenues, it has an adept management team keen on reducing its debt and growing the business.

Using a precedent transaction model, I determined Yamana’s intrinsic value to be $9.73, which represents a steep premium to the $4.87 it is currently trading. RRSP and TFSA investors would be wise to buy in.

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The company operates four segments that include personal and small business banking, Canadian commercial banking and wealth management, U.S. commercial banking and wealth management, and capital markets.

CIBC provides these services to 10 million personal banking, business, public sector and institutional clients in Canada, the United States and around the world. The company reports a market capitalization of $47.94 billion with a 52-week low of $97.55 and a 52-week high of $115.96.

Intrinsic price

Based on my calculations, using a comparable company analysis (CCA) valuation model, I determined that CIBC has an intrinsic value of $121.38 per share.

At the current share price of $107.62 at the time of writing, I believe CIBC is significantly undervalued. Investors looking to add a bank stock to their TFSA or RRSP should consider buying shares of CIBC.

CIBC has an enterprise value of $57.3 billion, which represents the theoretical price a buyer would pay for all of CIBC’s outstanding shares plus its net debt.

Financial highlights

For the fiscal year ended October 31, 2019, the company reports a solid balance sheet with $21 billion in retained earnings, up from $18.5 billion in 2018. This is a good sign for investors, as the company’s surpluses in previous years have been reinvested in the company.

CIBC reports a growth in the allowance for credit losses to $1.9 billion in 2019, from $1.6 billion in 2018 (+17%) which suggests the company is expecting increased defaults in the coming year. This increase is in-line with the increase in the allowance for the other six major banks.

Total revenues are up to $18.6 billion, from $17.8 billion in 2018 (+4.4%), offset by increase in expenses for pre-tax income of $6.5 billion, down from $6.7 billion in 2018 (-3.5%). This is largely driven by a $1.3 billion expense for credit losses, which is up from $870 million in 2018.

Management takes a proactive approach to debt management as suggested by the $1 billion repurchase of subordinated debt in 2019, $638 million repurchase in 2018 and $55 million in 2017. This is offset by a $1.5 billion issuance of subordinated debt in 2019 and $1.5 billion in 2018.

The company has a normal course issuer bid (NCIB) in place whereby the company repurchased and cancelled $109 million of shares in 2019, down from $417 million in 2018.

Dividends have consistently represented the largest cash outflow for CIBC under financing activities. In 2019, the company spent $2.4 billion on dividend payments, $2.1 billion in 2018 and $1.4 billion in 2017. The current dividend yield is 5.35%, which is achieved through quarterly payments of $1.44 per share.

Foolish takeaway

Investors looking to buy shares of a bank should look into buying shares of CIBC for their TFSA or RRSP. With positive retained earnings, solid operating performance and a management team that takes a proactive approach to debt management, CIBC is a solid choice. Further, the company has a consistent dividend that’s beneficial for income-oriented investors.

At its current share price of $107.62 at writing, I believe it is trading at a steep discount compared to its intrinsic value of $121.38. Thus, I would suggest investors buy shares of the company today.

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The bank’s head office is located in Montreal, Quebec, and its executive officers are in Toronto, Ontario. The company reports a market capitalization of $64.24 billion with a 52-week low of $88.24 and a 52-week high of $106.51.

Intrinsic price

Based on my calculations, using a comparable company analysis valuation model, I’ve determined that BMO has an intrinsic value of $176.08 per share.

At the current share price of $100.52 at the time of writing, I believe BMO is significantly undervalued. Investors looking to add a bank stock to their TFSA or RRSP should consider buying shares of BMO.

BMO has an enterprise value of $77.3 billion, which represents the theoretical price a buyer would pay for all of BMO’s outstanding shares plus its net debt.

Financial highlights

For the fiscal year ended October 31, 2019, the company reported a solid balance sheet with $28.7 billion in retained earnings, up from $25.9 billion the prior year. The increase in retained earnings is a good sign for investors, as it indicates the company’s surpluses in previous years are reinvested to fuel growth.

Given shareholders’ equity of $51.1 billion, goodwill of $6.3 billion, and intangibles of $2.4 billion, the company reported a tangible net worth of $42.3 billion. Tangible net worth refers to the real value of a company, which suggests that BMO is doing well financially.

BMO’s allowance for credit losses increased year over year and is roughly in line with the other six major banks. In 2019, the company allocated $1.9 billion for credit losses, up from $1.6 billion in 2018 (+12.9%). Credit loss provisions are funds set aside by banks for defaults, which suggests that BMO is anticipating increased defaults in the coming year.

Management takes a proactive approach to debt management, as indicated by the redemption of covered bonds for $3.8 billion in 2019, $567 million in 2018, and $2.6 billion in 2017. This is offset by proceeds from issuance of covered bonds amounting to $4.2 billion in 2019, $2.7 billion in 2018, and $5.8 billion in 2017.

BMO also repaid $1 billion in subordinated debt in 2019, $900 million in 2018, and $100 million in 2017. This is offset by proceeds from subordinate debt at $1 billion in 2019, $2.7 billion in 2018, and $850 million in 2017.

BMO only spent $90 million on the repurchase and cancellation of shares in 2019. This is down from $991 million in 2018 and $440 million in 2017. I commend management on this decision, as it frees up cash that can be used to grow the business.

BMO is a dividend-paying entity with a current yield of 4.21%, which is achieved through quarterly payments of $1.06 per share.

Foolish takeaway

Investors looking to buy shares of a bank should look into buying shares of BMO for their TFSA or RRSP. With positive retained earnings, solid operating performance, and a management team that takes a proactive approach to debt management, BMO is a solid choice.

At its current share price of $100.52, I believe it is trading at a steep discount compared to its intrinsic value of $176.08. Thus, investors would be smart to snag shares of the company now.

The post Revealed: This Is the #1 Bank Stock! appeared first on The Motley Fool Canada.

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