TSX Soars to Record Highs: Discover the Best Buys Right Now

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On Friday, the Toronto Stock Exchange (TSX) reached an unprecedented peak. The index stood at 25,992 points that day, marginally surpassing the record previously established in November 2024. Although this represents only a slight increase of about 1.1% compared to its prior highest point in November, it stands out as significant against the backdrop where prominent American indices—particularly the NASDAQ 100—are still lagging behind their peaks recorded earlier in 2024.

In previous writings, I delved deeply into the narrative of how the U.S. market faced significant declines over the course of this year. To recap briefly, this downturn was probably due to President Donald Trump’s imposition of tariffs. The stock prices plummeted upon their introduction but surged upward as these tariffs were gradually rescinded. It goes without saying that we must remain cautious moving forward.
totally
Certainly, identifying what drove the market movements is clear, yet the connection observed remains difficult to dismiss.

Due to the relatively robust performance of the TSX this year, fewer deals are available compared to before. Notably, major financial institutions and utility companies are trading at prices significantly higher than their five-year averages. Nonetheless, opportunities for finding good values persist. This piece delves into where attractive investments can still be discovered within the TSX index.

Energy

Canadian energy stocks remain relatively inexpensive. This is because

oil prices

suffered significantly this year — once more, probably due to Trump’s tariffs. If Trump proceeds with reducing these tariffs, oil prices might rebound. It also seems improbable that he would elevate his China tariffs to reach the highest levels observed this year. This issue created numerous challenges for the American economy, such as widespread divestment from U.S. treasuries during a period when the President aimed to decrease interest rates.

Consider

Suncor Energy

(

TSX:SU

It trades at 9.4 times earnings, 1.4 times book value, and four times operating cash flow. This makes its valuation notably lower compared to the overall market. Much of Suncoir’s affordability can be attributed to the crash in oil prices, which could potentially depress earnings for the upcoming quarter. Nevertheless, a single quarter isn’t overly significant when considering long-term prospects. Oil prices have begun recovering after the sell-off spurred by trade tensions, and although President Trump hasn’t entirely withdrawn his stance on tariffs, it seems improbable that tariff levels will reach their previously anticipated highs seen during the height of this year’s tariff worries. Meanwhile, positive factors supporting a robust oil sector—such as gradually increasing demand and OPEC maintaining stability—are present.

Some financials

Aside from energy stocks as a whole, you can also discover certain areas offering good value within this sector.

TSX financials

Here, the value isn’t spread across the entire sector as it is with energy—where you find numerous expensive banking stocks—but rather, there are pockets of value scattered throughout.

Consider

First National Financial

(

TSX:FN

Trading at 11 times earnings, 3.5 times sales, and 3.7 times book value, it appears more affordable compared to both the financial sector and the TSX index. Currently, this firm is experiencing a decline in earnings due primarily to the Bank of Canada’s interest rate reductions. These cuts have mainly aimed to prevent an excessive number of overleveraged homeowners from defaulting. Consequently, revenue fell during the past twelve months as a result. Nonetheless, the company could potentially offset these reduced mortgage rates through increased lending activities. Thus, if interest rates level off, their earnings ought to begin recovering soon.

Foolish takeaway

While Canadian markets are not as inexpensive as they once were a few years back, opportunities for good deals still persist. Should you decide to browse through the TSX energy and financial sectors, chances are high that you will find some attractive returns.

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TSX Reaches Peak Levels: Discover What’s Affordable and Truly Worth Purchasing

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Fool contributor Andrew Button holds shares in Suncor Energy. The Motley Fool does not have any stake in the companies mentioned above. Additionally, the Motley Fool discloses that they do not own positions in any of the aforementioned stocks.

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