The TSX, like most indices around the world, is suffering from a decline in the number of value plays available to investors. Following the financial crisis, investors certainly had the “pick of the litter” in terms of options available at discount prices.
In today’s pricey market, however, it appears much of the discussion around value has switched to growth, as investors become less concerned with fundamentals and more concerned with the growth prospects of companies.
While growth is indeed important, considering companies on the basis of fundamental analysis and value will always be crucial for conservative long-term investors. Value investing is a belief that companies which are undervalued will become fairly valued over time, and those which are richly priced will revert toward a longer-term mean in the long haul.
In terms of the Canadian financials sector, Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) remains the best value play among its peers, despite increasing approximately 15% since Q4 2017.
CIBC has traditionally held better value fundamentals due to the fact that CIBC is more exposed to the Canadian economy and less diversified than its peers; that said, it is very difficult to argue with its extremely low valuation multiples on everything from a price to earnings basis or price to cash flow.
Investors betting on continued global strength should consider Canadian financials as an option, with CIBC potentially being a core value holding for the long-term.
Invest wisely, my friends.
