Depending on who you ask, the broader stock market is getting just a bit pricier. Of course, the S&P 500 is a tad more expensive than it was a year ago. That said, we can’t go back in time and buy stocks at cheaper levels. What we can do, however, is keep our powder dry so that we can take advantage of market corrections. But the big question remains: is it better to hoard cash and T-bills, wait around for a market plunge, or continue with a long-term investment strategy as planned?
Indeed, having cash to buy dips is a good move if you’re nervous about investing ahead of a market pullback. However, I don’t think it makes a whole lot of sense to go all-in on cash, especially since inflation is still out there.
Sure, it’s back under control (most recently at just shy of 2% in Canada), but who’s to say it can’t come back in the near future?
Additionally, there’s the opportunity cost of overweighting cash. There’s still a “real” return to be had out there if you know where to look for it. On average, I believe that Canadian stocks have more value to offer. And in this piece, we’ll look at two stocks that I view as deeply undervalued this November.
Perhaps it makes sense to watch the names or buy some shares if you’ve got a cash hoard that you believe is a tad too large. Investing wisely with the long-term (10-15 years) horizon in mind, I believe, is prudent. Far more prudent than timing the stock market — something that not even the best trader or investor on Earth can do, at least not consistently.
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CN Rail
CN Rail (TSX:CNR) is a steady railway company that’s been a proven wealth builder and dividend grower over the decades. Over the past few years, the railway has kind of underperformed, at least relative to its historical track record.
Though it’s tough to know when the next economic upswing will jolt shares of CNR, I think the stock is a sound dividend-growth rockstar for any long-term focused portfolio. Further, whenever you can land a below-average or fair multiple on the wide-moat name, you may just score that much deeper value! Today, the stock looks like “dead money” at $150 and change per share after a brutal 16% plunge off recent highs. There have been a great deal of near-term headwinds, but none of them, I believe, change the long-term narrative or the growth trajectory.
All considered, I believe that the 2.25% dividend yield and 17.8 times trailing price to earnings (P/E) make for a blue-chip bargain hiding in plain sight. The rails are “wonderful” places to invest for the long haul, and I’d encourage investors to consider the name while it’s down and out.
Bank of Montreal
Bank of Montreal (TSX:BMO) shares are in a rough spot right now, now at $125 and change per share after going nowhere in the past two and a half years. Indeed, banking pressures have weighed on BMO stock more than some of its better-performing rivals.
The good news is the dividend yield is a lot sweeter today than at its 2022 peak, currently at 4.9%. Further, BMO has a long growth runway in the U.S. market, something that could help it keep growth robust over the next decade. Though the bank stock may be uneventful of late, I see the name as worth pursuing if you seek passive income at a discount.
