Often in investing, the biggest challenge isn’t finding the highest-quality TSX stocks to buy; it’s actually finding opportunities to buy them at a reasonable price.
Because the reality is that the best stocks on the market rarely trade at a discount.
They’re well-known, widely owned, and consistently deliver strong results, which means investors are almost always willing to pay a premium to own them. And that’s exactly why waiting for pullbacks becomes so important. Because when markets do get volatile, and they always eventually do, even the highest-quality stocks can temporarily sell off.
And those moments are often some of the best opportunities you’ll get to build a long-term position.
That’s why, instead of chasing stocks after they’ve already run up, it makes more sense to know exactly which businesses you want to own ahead of time so that when the opportunity comes, you can act quickly.
With that in mind, here are two of the very best stocks on the TSX that I’d be ready to buy the next time markets pull back.
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One of the best defensive growth stocks to buy on the TSX
One of the best examples of a stock that almost never stays cheap for long is Dollarama (TSX:DOL).
Dollarama has been one of the most consistent performers on the TSX for years, and it’s easy to see why.
It operates a simple, highly scalable retail model that continues to grow regardless of what’s happening in the broader economy.
When times are good, the discount retailer benefits from steady traffic and expansion. And when the economy slows down, it often sees increased demand as consumers look for lower-cost alternatives.
That’s one of the biggest reasons why Dollarama continues to thrive, and why it has been one of the best TSX stocks to buy for years. It can grow in any economic environment.
On top of that, Dollarama continues to expand its store network and improve its margins, which has helped the stock deliver massive long-term returns for investors.
However, recently, Dollarama stock has pulled back meaningfully following a weaker-than-expected earnings report.
Comparable sales growth came in below expectations, and the company also issued more cautious guidance, which weighed on investor sentiment. On top of that, ongoing investments in international expansion are putting some short-term pressure on margins.
As a result, the stock has sold off significantly from its highs. However, it’s worth noting that none of these factors change the long-term thesis. Dollarama’s business model remains intact, and its ability to grow in both strong and weak economic environments hasn’t changed.
So, while the stock now trades at a much more reasonable valuation, with a forward price-to-earnings (P/E) ratio of 33.2 times compared to 42.4 times just a few months ago, this is exactly the type of pullback that savvy long-term investors wait for.
A global growth stock with long-term tailwinds
In addition to Dollarama, another high-quality TSX stock you’ll want to buy on any dip is Brookfield Asset Management (TSX:BAM).
Brookfield Asset Management is one of the highest-quality businesses on the TSX, but for very different reasons than Dollarama.
Instead of operating a retail business, Brookfield focuses on managing capital for institutional investors across infrastructure, renewable energy, real estate, and private markets.
So, rather than relying on a single operation or industry, it earns fee-based revenue from managing a massive and growing pool of global capital.
That helps create a highly scalable business model with strong visibility into future earnings.
Additionally, Brookfield benefits from long-term trends as pension funds, sovereign wealth funds, and other institutions continue increasing their allocations to alternative assets.
That ongoing shift is why Brookfield is one of the best businesses to buy on the TSX, and it’s also why the stock rarely trades cheaply. Investors understand the quality of the business and its recurring fee-based earnings.
So, when broader sentiment weakens, and even high-quality stocks like Brookfield sell off in the short term, those are the opportunities you want to be ready to take advantage of.
Because over the long haul, as its assets under management continue to grow, so too will Brookfield’s earnings, its dividend, and ultimately its stock price.
