Investors looking for long-term winners are in luck. Indeed, the TSX happens to have some pretty great options available right now.
That said, finding the best value picks among the bunch can be difficult. In this article, I’m going to highlight three such stocks I think have excellent value. These stocks are among the best in their peer group, providing impressive upside potential.
Let’s dive in.
In the Canadian banking sector, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is perhaps one of the most non-Canadian banks. By that I mean the company has excellent geographical diversification outside Canada. The company is a big player in Central and South America and is focused on leveraging growth markets to provide investors with long-term upside.
Accordingly, the company’s current dividend yield of around 5% is supported by excellent fundamentals. Scotiabank’s current multiples are around industry average. Indeed, I view this valuation as better than its peers, given the company’s growth trajectory. As long as Scotiabank can continue to grow its cash flows at its current clip, investors can bank on more capital and dividend appreciation over time.
What more could long-term investors ask for?
Kirkland Lake Gold
Those seeking some real impressive value will want to look at Kirkland Lake Gold (TSX:KL)(NYSE:KL).
Okay, it’s a gold miner. Gold miners tend to be undervalued to begin with.
However, Kirkland Lake provides a whole other level of value. The company’s multiple of only 15 times earnings is absolutely dirt cheap. Indeed, when one considers where the company’s future cash flows will be with higher gold prices and higher production levels, the picture gets a lot brighter for this mid-cap gold producer.
Kirkland Lake proved its true value last year, providing capital appreciation at a time when almost every other stock was plummeting. Gold remains a very good market hedge in times of uncertainty. Those who have no idea what the future holds may want to add a little insurance today in the form of Kirkland Lake. At this valuation, the margin of safety with this stock is simply too wide to ignore.
Stocks with dividend yields in the 7% range are typically considered to be high risk. I’d concede that this is usually the case.
However, in the case of Enbridge (TSX:ENB)(NYSE:ENB), I believe this high yield reflects a relatively high amount of untapped value in this stock. The market has essentially moved away from pipeline players like Enbridge given the current unfavourable political environment for these stocks.
And that makes sense.
However, this sort of environment also provides a buying opportunity for long-term value investors. Enbridge is still a cash flow machine. The company’s dividend is still safe. For investors who are less concerned about capital appreciation than steady dividend income (I’ll agree; that’s a smaller and smaller percentage of the investing public), this is a great stock.
Enbridge might not move a lot from a stock price perspective in the coming years. However, the income investors will generate from this company will more than make up for lost time. Those with growing income needs may want to consider this stock as an undervalued holding today.
Like these three undervalued stocks? Here are a few more options we think have incredible value:
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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 Chris MacDonald has no position in any stocks mentioned in this article The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends BANK OF NOVA SCOTIA.