Artificial Intelligence Bots Say These TSX Stocks Are a Buy (But Are They Really?)

Artificial intelligence bots have become all the rage in recent months, with platforms like ChatGPT grabbing the headlines. These bots have their limits, with a major one for ChatGPT that the data expires in September 2021.

However, this can only be used for investors. Because when it comes to finding the best stocks for the future, it can be a good strategy to look to the past. And while it might be a good idea to look at how stocks are doing today, it can only it is just as important to see how they weathered the storms of the past.

So I tested ChatGPT to see if its analysis based on data from the past could help investors today.

The process

At first, I was big. I like to look at companies that have been on the TSX for 20 years or more.

To identify potential stocks, I asked ChatGPT what were the best value stocks on the TSX between 2001 and 2021. First, the AI ​​bot gave me what it defined as value stocks. It said the stocks it selected were based on favorable valuations relative to their fundamentals. These include a low price-to-earnings (P/E) ratio, the potential for future growth, and “solid” balance sheets.

The bot then shares its stock picks and the reasons it picked them:

1. “Royal Bank of Canada (TSX: RY): RBC has historically been considered a strong value stock due to its strong earnings, dividend payout, and attractive valuation metrics.
2. “Suncor Energy Inc. (TSX:SU): Suncor is considered a value stock due to its low valuation relative to its peers and potential for long-term growth.
3. “BCE Inc. (TSX:BCE): BCE is considered a value stock due to its strong cash flow, dividend payout, and defensive nature.
4. “Canadian Natural Resources Limited (TSX:CNQ): CNQ is often considered a value stock because of its low valuation, strong asset base, and potential for future growth.
5. “Magna International Inc. (TSX: MG): Magna has historically been considered a value stock due to its attractive valuation metrics, strong balance sheet, and exposure to the auto industry.

How these stocks stack up today

Now this is probably a good list, but we need to see if these companies remain the highest value stocks to consider in 2023. To do this, let’s look at the numbers today to find out whether they still fall into value territory.

Royal Bank stock currently has a moderate buy rating from nearly 10 analysts, as of this writing. It trades at 12.38 times earnings, which is higher than its peers currently. While it remains attractive with strong earnings and dividend payments, it looks more fair value than a value play at the moment.

Along with Suncor stock, it’s also a moderate buy from nearly 10 analysts. It trades at 6.28 times earnings, which looks cheap but is actually in line with other oil and gas peers. This includes CNQ stock, which trades at 8.41 times earnings as of writing. So, Suncor is probably closer to fair value.

Where it gets interesting is BCE stock and Magna stock. BCE stock is a hold recommendation from analysts. While it offers a 6.57% dividend yield, that may not be enough at this time ahead of a merger between its rivals — especially while trading at 21 times earnings.

Magna stock, however, is a moderate buy, based on 15 analyst ratings. Shares have fallen sharply, but it’s still overvalued at this point trading at 34 times earnings.

Silly takeaway

In fact, you could do a lot worse than these TSX stocks. While each seems to be of fair value or on the expensive side, it is a bad market at the moment. Every company definitely has strong cash flow, as well as the potential for long-term growth. Plus, they’ve been around for decades and should come out the other end of any recession relatively unscathed.

So while the ChatGPT data may be dated, if anything the bot can definitely give you a solid jumping off point for finding stocks that might be worth researching on your own right now.