3 Domestic Stocks That Are Too Cheap to Ignore

Leon’s Furniture (TSX:LNF) and two other deep-value stocks could roar back in 2023.

| More on:

The Canadian stock market had a big year in 2022. Sure, it was a brutal year on the whole for investors. But the TSX Index finally outdid the U.S. indices. It’s unclear as to whether Canada can continue to beat the U.S. in the front on financial market returns.

Regardless, I think there are many reasons to stay invested in TSX stocks over U.S. plays, even if valuations are lower south of the border, with a loonie that’s slightly more attractive after the latest run to around US$0.75.

The Bank of Canada (Canada’s central bank) will be hitting the pause button faster than the U.S. Federal Reserve. Indeed, this bodes well for the Canadian market, as it looks to move past the tightening cycle and the potential recession it could spark.

Without further ado, here are three domestic stocks that still seem full of value going into February 2023.

Bank of Montreal

Bank of Montreal (TSX:BMO) is a Canadian bank with a growing presence in the United States. Undoubtedly, domestic banking is a fine place to be for new investors. But in terms of longer-term growth, looking beyond Canada is a wise move. BMO has done a great job of pushing down south.

With the recent regulatory green light surrounding its Bank of the West deal, I view BMO as one of the most exciting bank stocks for investors looking to for a U.S. and Canadian play with a commercial banking twist. BMO’s retail and wealth management business has also been a promising spot for BMO.

The biggest attraction to BMO stock has to be valuation. It’s the cheapest (based on trailing price-to-earnings) bank of the Big Six basket right now at 6.7 times trailing price to earnings (P/E). I think the relative discount is unwarranted, especially considering some of the unique headwinds some of its international or domestically overexposed peers face.

With a 4.3% yield, BMO stock is my favourite bank to buy right now.

Spin Master

Spin Master (TSX:TOY) is another domestic firm that hasn’t gotten enough respect. Yes, a recession may be coming, and it’s worst for discretionary firms like toymaker Spin. Add bad news hitting its U.S. peers into the equation, and Spin has been one of the names to sell now and reconsider later.

Earnings and sales may not be in a spot to recover anytime soon. However, I think expectations are a tad on the low end. Spin has a lot of great brands like Paw Patrol going for it. Further, Spin’s digital games business could be what separates the firm from its peers, as it looks to innovate its way to take share away from its bigger brothers in the toy scene.

Finally, Spin does mergers and acquisitions quite well. It makes deals where it makes sense. Slowly, but steadily, Spin now has an outstanding roster of products. At 9.25 times P/E, I view Spin as worth taking a spin amid its multi-year tailspin.

Leon’s Furniture

Leon’s Furniture (TSX:LNF) is a big-ticket discretionary, which could be most vulnerable to a downturn. Still, the stock has already had the band-aid ripped off, with a more than 40% plunge in the rearview. I think the furnishing play has longer-term tailwinds (a large number of first-time homebuyers hitting the market through the next decade could mean upbeat furniture demand) that could help it through a choppy year.

At 6.89 times trailing P/E, LNF stock is another highly capable deep-value play that I don’t think will stay down for too long!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has positions in Bank Of Montreal. The Motley Fool has positions in and recommends Spin Master. The Motley Fool has a disclosure policy.

More on Investing

Canada national flag waving in wind on clear day
Tech Stocks

Trump Trade: Canadian Stocks to Watch

With Trump returning to the presidency, there are some sectors that could boom in Canada, and others to watch. But…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Investing

Is Canadian National Railway Worth Buying for its 2.2% Dividend Yield?

Let's dive into whether Canadian National Railway (TSX:CNR) is a top buy for long-term investors at this point in the…

Read more »

nuclear power plant
Energy Stocks

Is Cameco Stock Still a Buy?

Cameco stock recently reported earnings that showed the Westinghouse investment is creating some major costs. But that could change.

Read more »

cloud computing
Dividend Stocks

Insurance Showdown: Better Buy, Great-West Life or Manulife Stock?

GWO stock and MFC stock are two of the top names in insurance, but which holds the better outlook?

Read more »

analyze data
Dividend Stocks

Here’s Why the Average TFSA for Canadians Aged 41 Isn’t Enough

The average TFSA simply isn't enough for most Canadians in their early 40s. Here's how to catch up.

Read more »

A plant grows from coins.
Dividend Stocks

The Smartest Dividend-Growth Stocks to Buy With $1,000 Right Now

New dividend-growth investors should consider CN Rail (TSX:CNR) stock and another top play if they're looking to build wealth over…

Read more »

concept of real estate evaluation
Dividend Stocks

How to Earn a TFSA Paycheque Every Month and Pay No Taxes on It

Canadian REITs can turn your TFSA into a monthly paycheque machine for life. Here's how Morguard North American Residential REIT…

Read more »

Start line on the highway
Investing

2 No-Brainer Growth Stocks to Buy Now With $5,000 and Hold Long Term

Market conditions today are ideal for growth investing, and two rising stocks are no-brainer buys in November.

Read more »