True Blue Chips pay off

Learn everything you need to know in 'The Best Blue Chips for Canadian Investors' for FREE from The Successful Investor.

Canadian Blue Chip Stocks: Bank of Nova Scotia Stock, CP Rail Stock, CAE Inc. Stock and more.

Topic: Blue Chip Stocks

Discover the best investments on the TSX stock list for maximum investing success

Using our selection criteria to spot the best TSX stock list recommendations will help you choose top stocks for your portfolio

The TSX is the largest stock exchange in Canada and the third largest in North America. Of note is that the Toronto Stock Exchange has more oil and gas companies listed on it than any other stock exchange in the world. That’s also reflected in the S&P/TSX Composite Index. The Toronto Exchange started on October 25, 1861. The TMX Group operates a number of stock and commodity exchanges, including the TSX.

Today we look at the best types of investments to buy from the TSX stock list.

True Blue Chips pay off

Learn everything you need to know in 'The Best Blue Chips for Canadian Investors' for FREE from The Successful Investor.

Canadian Blue Chip Stocks: Bank of Nova Scotia Stock, CP Rail Stock, CAE Inc. Stock and more.

Consider the factors we aim for when looking for the best stocks on the TSX stock list 

  • We insist on political stability. For example, mineral exploration is risky enough without the threat of expropriation or onerous taxes.
  • We look for well-financed stocks with no immediate need to sell shares at low prices, since that would dilute the interests of existing investors.
  • We like to see a strong balance sheet with low debt. For junior stocks, we like to see a major partner who can finance a mine, software and so on to production.
  • We want to see experienced management with proven ability to develop and finance a new business.
  • We avoid stocks trading over-the-counter where regulatory reporting and so on is lax.
  • We avoid stocks trading at unsustainably high prices due to broker hype or investor mania.
  • We compare the market cap of the stock with the estimated value of its reserves, future product sales and so on.

Look for attractive spinoffs on the TSX stock list if you are targeting value

When a spinoff (the subsidiary of a business set up as an independent firm) begins trading, it stands to reason that investors will put a low price on it. After all, the spinoff hits the market with a large number of neutral, if not reluctant, stockholders who have limited expectations for it, and who are willing to sell when they get around to it.

One group of investors who might be willing to buy a new spinoff are value seekers. And on the whole, it pays to follow the lead of these seekers of undervalued stocks, and to hang on through months of sluggish trading while reluctant spinoff holders exercise their urge to sell.

Target undervalued investments on the TSX stock list for long-term gains

Some investors only feel safe buying stocks after prices have risen, which means that they often overlook TSX value stocks. Yet this is the opposite of the way you make most purchases (cars, clothing, etc.) Ordinarily, it’s better to buy when prices go down, not up. When buying stocks, you’ll find this same logic applies.

TSX value stocks are companies that are undervalued on the Toronto Stock Exchange. Some examples we have suggested as noteworthy TSX value stocks in the past include Calian Group (Toronto symbol CGY), Brookfield Renewable Partners L.P. (Toronto symbol BEP.UN) and Bank of Montreal (Toronto symbol BMO).

Blue chip stocks on the TSX stock list are key components of a successful portfolio 

TSX blue chip stocks are well-established companies with attractive business prospects on the Toronto Stock Exchange, like Bank of Montreal (TSE: BMO), CP Rail (TSX: CP, and Enbridge (TSE: ENB). Well-established firms have the asset size and the financial clout—including solid balance sheets and strong earnings and cash flow—to weather market downturns like the COVID-19 pandemic or changing industry conditions.

The best TSX blue chip stocks have strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in ever-changing marketplaces. Blue chip investments should always be prominent, if not dominant firms, in their industry.

Because of this, blue chip companies can give investors an additional measure of safety in today’s volatile markets. And the best ones offer an attractive combination of moderate p/e’s (the ratio of a stock’s price to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects.

We feel most investors should hold the bulk of their investment portfolios in TSX blue chip stock investments. All these stocks should offer good “value”—that is, they should trade at reasonable multiples of earnings, cash flow, book value and so on. Ideally, they should also have above average-growth prospects, compared to alternative investments.

Use our three-part Successful Investor approach to pick the best investments from the TSX stock list

  1. Hold mostly high-quality, dividend-paying stocks.
  2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
  3. Downplay or stay out of stocks in the broker/media limelight. 

Is the TSX stock list the first you turn towards, or do you have a preference to a different stock exchange?

How important is it to you to choose stocks from a specific exchange, such as the TSX?


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