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David Rosenberg points to plenty of value in Canadian bank stocks.The Canadian Press

Feel like giving up on Canada? David Rosenberg doesn't.

The chief economist and strategist at Gluskin Sheff + Associates can be provocative, with views that often run contrary to the prevailing sentiment. Right now, that sentiment can be summarized as "flee Canada" – so Mr. Rosenberg is embracing the country.

The S&P/TSX composite index has fallen 8.3 per cent since Nov. 21, erasing all of its gains from a rebound that began in mid-October. The index fell more than 300 points on Monday and declined another 343 points, or 2.4 per cent, on Wednesday. It closed at 13,852.95.

Energy stocks again led the way down, falling 4.9 per cent after a stunning collapse in oil prices. The most traded New York futures contract closed at $60.94 (U.S.) a barrel, down $2.88. But just about everything in Canada got clobbered: Telecom stocks fell 1.7 per cent, tech stocks fell 1.6 per cent, financials fell 1.7 per cent and industrials fell 3.1 per cent.

While Wednesday's selloff drew in most markets from around the world, Canada again received the biggest drubbing, highlighting its sensitivity to volatile commodity prices.

Reinforcing the trend, the Canadian dollar slumped below 87.1 cents against the U.S. dollar before closing at 87.11 cents, a fresh five-year low.

But Mr. Rosenberg argued that Canadian stocks offer compelling value. You can see this value in the benchmark index's dividend yield, which is rising as the index falls. According to Bloomberg News, the yield has risen to 3 per cent, which is higher than the yields on government bonds.

"You will not find this reality very often, but the Canadian equity market gives investors a premium all the way out to the long end of the Canadian yield curve," he said. Ten-year Government of Canada bonds yield less than 1.9 per cent; 30-year bonds yield just 2.4 per cent.

"Nor will you find it very often that the TSX dividend yield is above the S&P 500, let alone a 100-basis-point premium," he continued. The yield on the S&P 500 is below 2 per cent.

But if buying an index fund that tracks the S&P/TSX composite index looks like a daring bet on the plummeting energy sector, Mr. Rosenberg offers this alternative: Buy banks.

"Everyone is staring at what has happened in energy and does not see that the greatest opportunity has opened up in Canadian financials where you do not have to guess what level the price of oil is going to bottom out at."

Again, there are big dividends here. The banks yield nearly 3.7 per cent.

But Mr. Rosenberg sees value in other ways, too. Canadian banks trade at about 12.6 times trailing earnings. That is within the valuation range that has persisted since mid-2011, offering a nice counterpoint to the argument that the stock market has become expensive after a five-year bull market.

The banks' price-to-earnings ratio is particularly low next to the broader index, which sits about about 18 times trailing earnings.

"Historically, the banks have typically traded at a 15-per-cent discount to the overall TSX and now trade at a discount of 30 per cent on both a trailing and forward P/E basis," he said.

Not convinced? Many investors like to think of themselves as contrarian when the market is rising. During bad bouts of volatility, real contrarians are a rarer breed.

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