The bullish market left these three stocks behind, but they are now buying

Written by Andrew Button of The Motley Fool Canada

It has been a scorching year for the TSX composite indexwith many of the index’s key components reaching new highs. This year, the TSX index is up 24%. Some individual components, such as banks and utilities, have risen even more. It’s been a great time for those holding on since the lows of 2022.

The decision to invest today is a little more difficult. The TSX hit an all-time high a few days ago. It currently trades at just under 22 times earnings, which is a historically high multiple. Investors may want to take profits and reinvest their money in cheaper alternatives.

That’s not to say there isn’t value in the TSX not at all However. On the contrary, some quality stocks on the TSX have not joined this year’s rally and have become cheap as a result. In this article I will explore three of them.

TD bank

The Toronto Dominion Bank (TSX:TD) is a Canadian banking stock that is up 0.06% year to date. The reason why the stock is performing poorly is because it is embroiled in a scandal. TD counters in New York, Florida and New Jersey were caught laundering money for drug cartels. As a result, TD was investigated by the United States Department of Justice (DoJ). TD expects to receive at least $3.5 billion in fines related to the investigation.

Why is TD a good buy despite this scandal?

First, the bank expects to conclude the DoJ investigation by the end of the year, which would pave the way for a better year in 2025.

Second, the bank has spent large sums of money hiring money laundering and compliance experts to prevent future abuses.

Third and finally, the bank is currently one of the cheaper North American banks, with a trading value of just 1.3 times book value. Overall, the future looks promising.

Food Couche-Tard

Food Couche-Tard (TSX:ATD) is a Canadian gas station/convenience store company that has taken several hits this year. First, fourth-quarter earnings disappointed investors, sending stocks tumbling. The company then tried to acquire 7/11 for a high price tag, but was rejected by the Japanese owners. Finally, the stock was hit when oil prices unexpectedly fell below $70. ATD sells gasoline and diesel, which reduces revenues when oil prices are weak.

The story continues

Is ATD worth the investment today?

It is certainly a very good company. As for the current valuation (22 times earnings or 15 times normalized earnings), it is slightly higher than I would be willing to pay for a company of this type with only modest growth prospects. However, I would say that someone who is willing to wait for the long haul will do quite well.

B.C

BCE Inc (TSX:BCE) is a Canadian telecommunications stock known for its extremely high dividend yield. With a return of 8.4%, this is one of the highest returns among TSX large caps. The company provides mobile, internet and television services across Canada. Revenues are growing, but net income has fallen in recent years, thanks in no small part to rising interest rates. Nowadays interest rates are falling. That offers some hope that the company’s profits will rise. The stock trades at 20 times earnings; But if you assume the country can get back to 2021 profit levels, it’s cheap. The ratio of BCE’s stock price to its 2021 earnings level is just 15.

The post The Bullish Market Left These Three Stocks Behind, But They’re Buying Now appeared first on The Motley Fool Canada.

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Foolish employee Andrew Button has positions at Toronto-Dominion Bank. The Motley Fool holds and recommends positions in Alimentation Couche-Tard. The Motley Fool has a disclosure policy.

2024