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While the Magnificent Seven companies in the U.S. are often the focus of tech enthusiasts, Canadian investors should consider looking closer to home. Given the current exchange rate challenges for Canadians trading loonies for U.S. dollars, investing in TSX stocks offers a promising alternative. Although the TSX Index lacks the same tech-heavy lineup, it still boasts several impressive earnings growers that can enrich investors over the long term.
Here, we focus on two magnificent Canadian financial stocks ideal for long-term investors aiming to hold for the next three to five years—a realistic time horizon for most.
Fairfax Financial Holdings
Fairfax Financial Holdings (TSX:FFH) has demonstrated why it's unwise to bet against Prem Watsa, the “Canadian Warren Buffett.” Watsa, like Buffett, doesn’t have a flawless track record, but his deep-value investment approach pays off over the long haul. Despite initial doubts during the early days of the pandemic, FFH has more than doubled in the past two years, with shares now surpassing $1,500.
Even with this impressive run, Fairfax remains a value play, trading at 7.2 times trailing price-to-earnings (P/E). The insurer's strong fundamentals and consistent underwriting performance make it a stock worth holding for decades. Investors looking to get in on this stock should consider that despite its high share price, it remains a solid long-term bet unless there's a significant shift in its fundamentals or valuation.
Brookfield Asset Management
Brookfield Asset Management (TSX:BAM) is another top-notch financial firm, known for its stellar management. Currently, BAM offers a 3.9% dividend yield, although its share price has remained relatively flat this year. With a forward P/E of 32.2, it may seem expensive, but the company's reputation and track record of smart deals justify this valuation.
BAM is an excellent choice for passive income, ideal for Tax-Free Savings Accounts (TFSA) or Registered Retirement Savings Plans (RRSP). While waiting for a potential pullback to the $35 per share level could be prudent, starting a position now could also be wise for those with extra cash looking to invest in a reliable asset management firm.
For Canadian investors with a long-term horizon, both Fairfax Financial Holdings and Brookfield Asset Management represent strong investment opportunities. Each offers unique strengths and stability, making them worthy additions to a diversified portfolio. Whether you’re looking for deep-value plays or reliable passive income, these TSX stocks are excellent choices for weathering market fluctuations and achieving long-term growth.
