Some Canadian stocks seem almost unstoppable as they move into year’s end with the wind fully at their back. Undoubtedly, betting on such high-flying momentum plays can be rewarding over the near term for those who time their entries and exits. However, longer-term investors should proceed with caution as they look to nibble their way into a stock on strength and double down on any dips that’ll surely be found on the road higher.
In any case, if you’re a new, young investor, the following two deserve your attention. And while it would be ideal if you bought on a near-term pullback, I’m certainly not against starting a position right here with the hope of adding should the market be correction-bound in 2025.
Indeed, I think it’s safe to say we’re long overdue for a market-wide spill, perhaps after the so-called Trump put has run its course. Without further ado, here are two names I’d add to the radar this December.
In this piece, we’ll examine two interesting high-momentum Canadian stocks that still look absurdly cheap. Whenever a rising share price is supported by earnings, sales, and an improving growth narrative, you may just have a momentum stock that could be destined for higher highs.
Source: Getty Images
Fairfax Financial Holdings
It’s pretty rare to come across a stock that’s skyrocketed over 64% in a year but still boasts a ridiculously depressed single-digit price-to-earnings (P/E) multiple. Heck, such low P/E ratios tend to be associated with value traps, let alone a stock that’s been on a profoundly powerful multi-year bull rally!
Fairfax Financial Holdings (TSX:FFH) stock fits the bill as a high-flyer that some may also classify as a deep-value play. On the surface, FFH looks dirt-cheap at 8.75 times trailing P/E, with a 1% dividend yield. Looking a year out, FFH shares still look absurdly underpriced at 9.45 times forward P/E.
As Prem Watsa’s company looks to add to his firm’s strengths in the new year, the coast could be clear for more outsized gains, especially with a rock-bottom multiple that has ample room to expand. Further, Fairfax’s underwriting has been simply sensational of late. And going into the new year, there’s no reason to believe it’ll back down after another respectable year.
While sitting out on a parabolic run is always discouraging for new investors, I think it makes sense to put new money to work right here at new all-time highs, just north of $2,000 per share.
Constellation Software
Constellation Software (TSX:CSU) is another high-momentum play that can keep the good times going into 2025. Like Fairfax, the share price is in the quadruple digits ($4,650 per share at the time of writing), making it long overdue for a stock split.
Though only time will tell if CSU will get a split that would make it more accessible to the retail crowd, I think those who can afford to punch a ticket should do so on a potential pullback to the $4,400 range. Indeed, acquisition spending may have slowed down, a trend that I believe will reverse over the next year or two once rates have a chance to fall further and valuations in the small-cap tech scene come in a bit.
Either way, the growth profile looks as strong as ever as the company looks to benefit from the many Canadian software firms in its book of businesses. At 36.0 times forward P/E, you’re paying a pretty penny into the name here. However, it’s one worth paying given powerful, likely long-lasting growth drivers that could power many years’ worth of high double-digit (thinks +20%) in sales growth. In short, Constellation is a durable, high-growth tech star that’s quickly becoming a must-own for those looking to build wealth in the coming decade.
