In this article, we discuss 10 best TSX stocks to buy now. If you want to see more stocks in this selection, check out 5 Best TSX Stocks To Buy Now.
Finance Minister Chrystia Freeland warned Canadians on October 19, saying the next few months will be hard as increasing interest rates erode a once-thriving economy and force people into unemployment. Freeland noted that The Bank of Canada’s latest rate hikes to control rampant inflation will raise borrowing costs for businesses and consumers alike, which will send tremors of shock through the economy in the near-term.
The Bank of Canada, like the United States’ Federal Reserve, aims to target price stability and bring inflation down to 2%. This attempt by the central bank could trigger a recession in 2023. While the finance minister said that the government cannot possibly compensate every Canadian who is impacted by the skyrocketing inflation, the most vulnerable people will be helped so they can cover the rising costs of food and rent. Freeland highlighted the passage of Bill C-30, a government legislation to double the GST credit paid to low-income households for a while.
Canadian consumer confidence fell to an all-time low apart from the last two economic crises, which increases the likelihood of a recession. Amid a chaotic market environment, notable equities listed on the Toronto Stock Exchange are trading at significant discounts. While investors usually pile into defensive names like The Procter & Gamble Company (NYSE:PG), Johnson & Johnson (NYSE:JNJ), and The Coca-Cola Company (NYSE:KO) in a volatile market, it is a good idea to jump into some TSX stocks for broader exposure.
Our Methodology
We selected the best TSX stocks based on positive analyst coverage, strong underlying business fundamentals, and future growth prospects once the market gains momentum. We have assessed the hedge fund sentiment from Insider Monkey’s database of 895 elite hedge funds tracked as of the end of the second quarter of 2022.
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Best TSX Stocks To Buy Now
10. Royal Bank of Canada (TSX:RY.TO)
Number of Hedge Fund Holders: 12
Royal Bank of Canada (TSX:RY.TO) was founded in 1864 and is headquartered in Toronto, Canada. It is a diversified financial service company working worldwide, operating through Personal & Commercial Banking, Wealth Management, Insurance, Investor & Treasury Services, and Capital Markets segments. On October 4, Royal Bank of Canada (TSX:RY.TO) announced that it has acquired MDBilling.ca, a cloud-based platform that automates and simplifies medical billing for doctors in Canada. This acquisition advances RBC’s existing medical billing firm portfolio.
On September 29, Barclays analyst John Aiken reinstated coverage of Royal Bank of Canada (TSX:RY.TO) with an Overweight rating and a C$137 price target after the conclusion of the Brewin Dolphin acquisition. The purchase of the discretionary wealth manager places Royal Bank of Canada (TSX:RY.TO) in the top three asset managers in the U.K. and Ireland, the analyst told investors in a research note.
According to Insider Monkey’s Q2 data, 12 hedge funds were long Royal Bank of Canada (TSX:RY.TO), compared to 21 funds in the last quarter. D E Shaw held a notable position in the company, comprising 342,394 shares worth $33 million.
In addition to The Procter & Gamble Company (NYSE:PG), Johnson & Johnson (NYSE:JNJ), and The Coca-Cola Company (NYSE:KO), Royal Bank of Canada (TSX:RY.TO) is one of the best stocks to consider for a balanced portfolio.
Here is what Gator Capital Management has to say about Royal Bank of Canada (TSX:RY.TO) in its Q1 2021 investor letter:
“We own a position in Royal Bank of Canada (“RBC”) and are completing our due diligence on several other Canadian banks. Royal Bank is the #1 bank in Canada. It has a business mix similar to JP Morgan Chase (“JPM”) with strong retail and corporate banking businesses. It also has a significant investment banking and asset management business. From here, we believe Canadian bank stocks will generate attractive returns for shareholders in the medium and long term.
Here is more detail on our investment thesis for Royal Bank of Canada:
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Bank with consistently high returns – RBC consistently posts Return on Tangible Common Equity (“ROTCE”) in the low 20%. In contrast, JPM has reported ROTCE between 12% and 19% over the last six years. We think this reflects the higher margins of the Canadian banking system.
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Leading bank in Canada – RBC is the leading bank in Canada. It has the highest returns, the highest market share, and the highest valuation of the five major Canadian banks. We believe other stock market investors will favor RBC when Canadian banks regain favor.
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Low relative valuation to US Banks – Canadian banks have had premium valuations compared to US banks for a few decades due to their higher and more consistent returns. Over the last 10 years, this valuation premium has almost disappeared. The chart below shows the price-to-tangible book ratio (“P/TB”) of RBC compared to JPM’s. As you can see, in 2011 RBC traded at 3x P/TB while JPM traded at 1x. Now, both banks trade at 2.5x P/TB.
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Strong growth at City National – RBC’s US Subsidiary, City National Bank, is growing very quickly. RBC purchased City National in 2015. City National was an LA-based bank focused on high-net-worth customers. At the time of the purchase, City National had already expanded and gained traction in San Francisco and New York. Now, City National has branches in Washington, DC, Atlanta, Miami, Dallas, Minneapolis, San Diego, and Las Vegas. City National has a banking strategy similar to that of First Republic and is growing at a comparable rate. We would note that First Republic trades at 26x 2021 estimated earnings. (Click to read full text)
9. Bank of Montreal (TSX:BMO.TO)
Number of Hedge Fund Holders: 12
Bank of Montreal (TSX:BMO.TO), a diversified financial services firm primarily operating in North America, is one of the best TSX stocks to buy. The company provides personal banking products, cash management solutions, foreign exchange, specialized banking programs, treasury and payment solutions, and risk management products, among other financial services. On August 30, Bank of Montreal (TSX:BMO.TO) declared a C$1.39 per share quarterly dividend, in line with previous. The dividend is payable on November 28, to shareholders of record as of November 1. The forward yield was 4.36%.
On October 21, Bank of Montreal (TSX:BMO.TO) disclosed a domestic public offering of $750 million of 6.534% subordinated notes due 2032 through its Canadian Medium-Term Note Program. Interest on notes will be paid bi-annually until October 27, 2027 and at Daily Compounded CORRA plus 2.70% thereafter, on a quarterly basis, until their maturity on October 27, 2032. The offering will close on October 27, 2022 and the proceeds will be utilized for general banking purposes.
Desjardins analyst Doug Young on September 1 maintained a Buy rating on Bank of Montreal (TSX:BMO.TO) but lowered the price target on the shares to C$150 from C$153.
According to Insider Monkey’s data, Bank of Montreal (TSX:BMO.TO) was part of 12 hedge fund portfolios at the end of Q2 2022, compared to 15 in the earlier quarter. Israel Englander’s Millennium Management held the leading stake in the company, comprising 538,483 shares worth about $52 million.
8. TELUS Corporation (TSX:T.TO)
Number of Hedge Fund Holders: 15
TELUS Corporation (TSX:T.TO) is a Vancouver-based company that provides telecommunications and information technology products and services in Canada. It operates through Technology Solutions and Digitally-Led Customer Experiences segments. The company has nearly 17 million subscriber connections, including mobile phone subscribers, connected device subscribers, internet subscribers, residential voice subscribers, TV subscribers, and security subscribers. TELUS Corporation (TSX:T.TO) is one of the best TSX stocks to buy now.
On October 18, TELUS Corporation (TSX:T.TO) announced that it is introducing a new online platform to commemorate Small Business Month this October. The new platform, ShopWithOwners.ca, will support Canadian business owners in terms of gaining exposure to customers seeking locally made gifts during the holiday season.
Investment advisory Scotiabank on October 11 maintained an Outperform rating on TELUS Corporation (TSX:T.TO) but trimmed the price target on the shares to C$31.50 from C$34.50. Analyst Maher Yag issued the ratings update.
According to Insider Monkey’s second quarter database, 15 hedge funds held stakes worth $256.5 million in TELUS Corporation (TSX:T.TO), compared to 15 funds in the earlier quarter worth $212 million. Jim Simons’ Renaissance Technologies held the leading stake in the company, comprising 3.7 million shares valued at $82.4 million.
7. Thomson Reuters Corporation (TSX:TRI.TO)
Number of Hedge Fund Holders: 22
Thomson Reuters Corporation (TSX:TRI.TO) is a Toronto-based company offering business information services in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company operates through five segments – Legal Professionals, Corporates, Tax & Accounting Professionals, Reuters News, and Global Print. It is one of the premier TSX stocks to invest in.
Canaccord analyst Aravinda Galappatthige on August 5 raised the price target on the shares to $122 from $115 and reiterated a Buy rating on the shares. The analyst believes the 2023 outlook remains achievable and potentially beatable despite the tough macro environment.
According to the second quarter database of Insider Monkey, 22 hedge funds held stakes worth $351.6 million in Thomson Reuters Corporation (TSX:TRI.TO), compared to 23 funds in the last quarter worth $315 million. Ken Griffin’s Citadel Investment Group is a prominent position holder in the company, with 556,746 shares valued at $58 million.
6. Rogers Communications Inc. (TSX:RCI-B.TO)
Number of Hedge Fund Holders: 29
Rogers Communications Inc. (TSX:RCI-B.TO) was founded in 1960 and is headquartered in Toronto, Canada. It operates as a communications and media company in Canada, offering mobile Internet access, wireless voice and enhanced voice, device protection, global voice and data roaming, bridging landline, and machine-to-machine and Internet of Things solutions.
On October 17, Rogers Communications Inc. (TSX:RCI-B.TO) announced that it intends to merge with Shaw Communications Inc. (TSX:SJR-B.TO) and the company will present its case to Canada’s Competition Bureau between October 27 and October 28. The deal has received approval by Shaw shareholders, the court, and the Canadian Radio-television and Telecommunications Commission. However, the Competition Bureau has sued to block the transaction.
Scotiabank analyst Maher Yaghi on October 11 reiterated an Outperform rating on Rogers Communications Inc. (TSX:RCI-B.TO) but lowered the price target on the shares to C$69.50 from C$72.50.
According to Insider Monkey’s data, 29 hedge funds were long Rogers Communications Inc. (TSX:RCI-B.TO) at the end of Q2 2022, compared to 14 funds in the preceding quarter. Joseph Sirdevan’s Galibier Capital Management is a significant position holder in the company, with 829,157 shares worth nearly $40 million.
In addition to safe investments like The Procter & Gamble Company (NYSE:PG), Johnson & Johnson (NYSE:JNJ), and The Coca-Cola Company (NYSE:KO), elite hedge funds are piling into Rogers Communications Inc. (TSX:RCI-B.TO).
Here is what Diamond Hill International Fund Concentrated Fund has to say about Rogers Communications Inc. (TSX:RCI-B.TO) in its Q1 2022 investor letter:
“Rogers Communications reported a solid Q4 as the firm continues to recover from prior COVID-related pressures on service revenue and customer acquisition. The resolution of recent board-level discord also may have contributed to the share price appreciation during the quarter.”
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Disclosure: None. 10 Best TSX Stocks To Buy Now is originally published on Insider Monkey.
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