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The stunningly quick stock market rebound is your basic nightmare if you’re an investor who was hoping for time to hunt for bargains after the March crash.

As of late July, the S&P/TSX composite index was off just 9 per cent over the previous six months and the S&P 500 was off 2.6 per cent. The moment of maximum pain for stocks has long passed, but there are still some decent values to be had.

One way to find them would be to apply the thinking of Benjamin Graham, the guy who literally wrote the book on finding undervalued stocks. He’s a guru for generations of investors, including Tom Connolly, one of this country’s foremost experts on dividend investing and publisher of DividendGrowth.ca.

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Mr. Connolly recently supplied a list of 10 TSX-listed stocks that he considers to be under or fairly valued by the standards of Mr. Graham. Specifically, Mr. Connolly searched for stocks with a moderate Price-Earnings Ratio and a moderate ratio of prices to assets. If you’re interested in specifics, Mr. Connolly said these criteria are discussed on page 185 of the fourth edition of Mr. Graham’s book, The Intelligent Investor.

Mr. Connolly started with a list of 25 strong dividend growth stocks and then looked for companies with a July 20 share price that was below the valuation suggested by applying Mr. Graham’s analysis. The ten stocks that appeared on the list are:

  • Power Corp. of Canada (POW-T): A Graham price of $43 according to Mr. Connolly, and a July 20 price of $25
  • Bank of Nova Scotia (BNS-T): Graham price of $90, $57 on July 20
  • Canadian Imperial Bank of Commerce (CM-T): $145, $94
  • Great-West Lifeco Inc. (GWO-T): $36, $24
  • Bank of Montreal (BMO-T): $98, $75
  • Toronto-Dominion Bank (TD-T): $77, $62
  • National Bank of Canada (NA-T): $70, $63
  • Royal Bank of Canada (RY-T): $100, $96
  • Canadian Tire Corp. Ltd. (CTC.A-T): $125, $122
  • Atco Ltd. (ACO-X-T): $42, $42

“Of interest, perhaps, are the positions of the banks, “Mr. Connolly wrote in an e-mail. “All [are] value-priced.”

If you’re a fan of Mr. Connolly, he gave up his newsletter but has continued to post on his DividendGrowth.ca blog. He aims to continue into next year, which would make it 40 years of helping people find success as dividend investors.


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A 10-point pandemic personal finance checklist: Create a “wartime” family budget; stop worrying about bank deposits; clean out your big-bank savings account; get relief on car payments; get preapproved for a mortgage; WFH? Save $1,000 a month; save, save, save; build resilience by not anxiety-buying; consider the cost of mortgage deferrals; get ready for the second wave of financial distress.

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