Despite an economic slowdown that’s expected to continue next year, the S&P/TSX and the S&P 500 are riding high.
So, 2026 is a year to be wary of overpriced stocks, which aren’t limited to the often frothy tech sector. That especially applies to faddish AI stocks in bubble mode.
The stocks highlighted here are “keepers” — blue chips that can ride out continued trade uncertainty in 2026 and maintain the high dividend yields that several of them boast. And while none of the stocks here are “screaming buys,” most are undervalued, trading at a discount to their most recent peak prices.
And remember the golden rule: Don’t buy anything you wouldn’t be comfortable owning 10 years from now.
Empire Co. Ltd. (EMP.A-T)
Empire, parent of Sobeys and several other grocery banners, has grown its sales by eight per cent in the past five years, to $31.3 billion in fiscal 2025.
Canada’s second-largest grocer after Loblaw Cos. has managed to increase its revenues in a traditionally slow-growth retail food sector despite the economic slowdown of the past two years and intensified competition from Walmart, Costco and Amazon.
In transitioning in November to a new CEO after the eventful nine-year tenure of Michael Medline, Empire was fortunate to have Medline’s long-time second-in-command, Pierre St-Laurent, to tap as Medline’s successor. Medline fixed Empire’s troubled Safeway chain and further boosted revenues with his acquisitions of food retailers Farm Boys and Longo’s.
St-Pierre is a 34-year veteran of Empire, where he was most recently chief operating officer, and has worked in a variety of roles at Empire including finance, distribution and logistics, and merchandising. St-Pierre collaborated in Medline’s Empire transformation, streamlining the operations of Empire’s 1,600 stores with banners including Sobeys, FreshCo, IGA, Foodland and Thrifty Foods.
Long term, Empire has upside potential in revenue growth once the uncertainly over U.S. tariffs is lifted. And shoppers who migrated to discount stores like Empire’s FreshCo during the cost-of-living crisis are starting to return to full-size supermarkets, a more dominant part of Empire’s portfolio than of its Big Three rivals, Loblaw and Metro Inc. St-Laurent is expected to cautiously expand Empire, adding about 20 stores in 2026 and improving the financial performance of a slow-growing Vioilà e-commerce business that has yet to achieve profitability.
With a price-earnings ratio of 16, Empire stock is priced lower than competitors Loblaw (30) and Metro (21). And Empire’s profit in fiscal 2025, at $700 million, was 16 per cent below the company’s 2022 peak.
Canadian Pacific Kansas City Ltd. (CP-T)
Calgary-based CPKC has gone from strength to strength after its US$31 billion merger with Kansas City Southern in 2023.
The merger created the first single-line railway connecting Canada, the U.S. and Mexico, with access to Mexican ports on both the Gulf of Mexico and the Pacific Ocean, complementing CP’s port access in Vancouver and Atlantic Canada. CKCP has yet to fully integrate its new combined network of 20,000 route miles and realize the higher traffic volumes and revenues that will result.
CEO Keith Creel has created a direct north-south corridor connecting Canada and Mexico, which CPKC calls a “land bridge” over the U.S. that has generated incremental revenue, and there is potential for more profit from such strategic use of CPKC’s assets. Creel has expressed concern to American rail regulators about the impact on competition from the proposed US$85-billion merger of two of the U.S. Big Four railroads Union Pacific Corp. and Norfolk Southern Corp. announced in July, which would create America’s first transcontinental railway.
But CPKC would be somewhat insulated from the impact of the proposed merger because it is essentially a north-south railroad competing more with trucks than with regional rail operators like UP and Norfolk. And while the Trump administration is business-friendly, even it might balk at a UPNS combination that would handle about 40 per cent of U.S. freight traffic.
CPKC’s revenues have steadily increased in recent years, to a record $14.5 billion in 2024, and profits have climbed by more than 50 per cent in the past five years to $3.7 billion in 2024.
At $101, CPKC stock trades about 20 per cent below its March 2024 peak on concerns of a U.S. economic slowdown and trade disruptions from the Trump administration’s tariff regime. Given what analysts regard as the temporary nature of those issues, they have a consensus price target for CPKC of $120.
Canadian Natural Resources Ltd. (CNQ-T)
CNRL is a stock market darling whose share price has more than doubled in the past five years, to a current $46. But the stock has dropped by about 16 per cent from its most recent high in 2024, creating a buying opportunity.
CNRL has for several years been among the world’s largest independent oil and gas producers and it keeps growing. Its US$6.5 billion acquisition last year of Chevron Corp.’s 20 per cent stake in the Athabasca Oil Sands Project consolidated its ownership of that major heavy oil play. With the deal came assets in central Alberta’s Duvernay shale project.
CNRL has an enviable reputation for making strategic acquisitions at reasonable prices whose production capacities have yet to be fully realized — a preoccupation for President Scott Stauth.
“We’re not buying something just to grow, we’re buying something that adds cash flow” and “adds additional value for our shareholders,” Stauth says.
The Canadian oilpatch is attracting U.S. investors now that CNRL and other major Alberta producers have driven down their production costs. Their average break-even price of US$40 to US$57 a barrel means they profit even as the world oil price has declined by about 15 per cent this year, to a current US$58. That lower price, the result, in part, of high OPEC production levels, renders many U.S. frackers unprofitable and is diverting some U.S. investment north to where producers like CNRL are more resilient.
Another positive for the stock is the opening in 2024 of the Trans Mountain Pipeline expansion which carries crude from Edmonton to the B.C. coast for export to Asia-Pacific and U.S. West Coast markets. CNRL is both a growth and income stock, with a generous yield of about 5 per cent.
Alimentation Couche-Tard Inc. (ATD-T)
Already one of the world’s biggest convenience store operators, Alimentation Coche-Tard, known for its Circle K banner, is still on the takeover trail.
Its high-profile setback in July 2025, when it ended its futile pursuit of 7-Eleven operator Seven & I Holdings Co. Ltd. of Japan, has obscured Couche-Tard’s success in, for instance, buying the huge Western European “c-store” division of French oil giant TotalEnergies SE in 2023 for US$3.3 billion.
And Couche-Tard has a strong balance sheet to finance more acquisitions in the still-fragmented c-store industry.
The 7-Eleven setback might have done Couche-Tard investors some good by encouraging management to “sweat” its existing assets the way 7-Eleven does. Seven & I operates must-visit stores across Asia Pacific that are renowned for their imaginative fresh food offerings and not just the tobacco, snack food, and soft drinks that c-stores in North America are most known for. Laval, Que.-based Couche-Tard owns one of the world’s biggest food and sundries distribution channels, with 17,300-plus locations in more than two dozen countries.
Lately Couche-Tard has been remodelling existing stores and pushing higher-margin goods through that distribution channel, including beer and wine and bargain-priced “food-bundle” offerings, or meal deals, centred on hot dogs, egg and cheese croissants and choice of beverage for $5. There’s room for more such “organic,” or internal, growth, along with new revenue from future takeovers.
That helps account for Couche-Tard’s 70 per cent revenue growth in the past five years, to $101.5 billion in fiscal 2025. Profits have soared by more than 50 per cent in the same period to 2025’s $3.7 billion. Yet at $74, Couche-Tard shares trade at a 15 per cent discount to their high in 2024.
National Bank of Canada (NA-T)
Recent acquisitions have increased Montreal-based National Bank’s potential for improvement on its already impressive financial performance. The bank’s profits have jumped by 90 per cent in the past five years, on a 160 per cent increase in interest income in that period.
In February 2025, National completed the biggest acquisition in its history, of Edmonton’s Canadian Western Bank (CWB). And in November, National agreed to buy Laurentian Bank of Canada’s retail and small-business deposit and loan books without adding branches or employees. The deals strengthen National’s presence in Alberta and British Columbia, and in Quebec, respectively, and they expand National’s mix of clients, notably in services to small- and medium-sized businesses (SME), a sector that National has emphasized in recent years.
Despite integration costs associated with the acquisitions, and a 50 per cent increase in loan-loss provisions in a weak economy, National was able to report an 11 per cent jump in its 2025 fourth-quarter profit, to $1.1 billion. National expects to reach its goal of $270 million in cost savings from the CWB purchase in 2026, a year ahead of schedule. At $173 per share, National’s stock is trading near its all-time high, having posted a 141 per cent gain in the past five years.
National faces continued economic headwinds in the short term, or what CEO Laurent Ferreira describes as a “complex macro-environment.” But there is upside potential from an end to the uncertainties for consumers and businesses caused by the U.S. trade assault on Canada.
In the meantime, Ferreira says the latest federal budget “should support consumer consumption and resilience.” National has set a goal of achieving a return on equity of 17 per cent by 2027, up from the current level of 14.6 per cent.
