Just because a stock has a great degree of momentum behind it doesn’t mean there isn’t any value to be had. Indeed, a seemingly pricier stock could be a heck of a lot cheaper if the fundamental story and growth narrative have improved with time.
The big question is whether the higher valuation justifies any such fundamental improvements and whether recent tailwinds are secular or more cyclical in nature. Either way, this piece will check out two seemingly undervalued TSX stocks that have momentum on their side, making them great long-term buys for value investors and upside seekers alike.
Of course, investors should put in their own homework before punching their ticket as we head into a potentially choppier final two months (and change) of 2024.
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Brookfield Corp.
Brookfield Corp. (TSX:BN) stock has been a stellar performer over the past year, soaring close to 78% in the past year alone. Indeed, it’s been quite the ascent, and though shares aren’t the same deal as they were just a few quarters ago, I still think the diversified alternative asset manager is still a great pick-up for those with long-term time horizons.
Though there’s a great deal of past-year momentum behind the name, shares have most recently pulled back by around 4%. I think that’s nothing short of a buying opportunity for investors seeking best-in-breed alternative asset exposure. At 12.3 times forward price-to-earnings (P/E), BN stock still looks like a deep-value momentum stock that long-term investors can really get behind.
Waste Connections
Up next, we have Waste Connections (TSX:WCN), a waste collection service provider that’s up a respectable 35% over the past year. Undoubtedly, the waste collection business may not be a source of explosive gains, but it is a rather defensive one that stands to do well under almost any type of economic environment. If we fall into a hard-landing type of recession, Waste Collections is poised to continue moving forward. And if times are good and the economy takes things into overdrive?
Waste Collections will also stand to gain. Undoubtedly, the firm enjoys a win-win proposition, making it a great core holding for any TFSA (Tax-Free Savings Account) or RRSP (Registered Retirement Savings Plan).
At the time of writing, shares of WCN look just a tad on the expensive side at 54.4 times trailing P/E. Despite the rather frothy multiple, I’d not give up on the name as it continues tapping into M&A to grow by leaps and bounds. Indeed, it’s hard to find wide-moat firms that have the ability to grow in such a steady, defensive manner. As one of the few high-growth defensives on the TSX Index, long-term growth investors shouldn’t feel all too bad about paying a slight premium to get into the name.
Aside from growth-by-acquisition opportunities, the company also boasts some enviable pricing power. Indeed, Waste Connections is oftentimes the only game in town in the communities it serves, allowing it to call the shots when it comes to pricing. All considered, WCN is a dividend growth powerhouse and one that could continue its ascent going into the new year.
