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 taking over headlines. These bots have their limitations, with a major one for ChatGPT being that data ends as of September 2021.

Even so, this might just work for investors. Because when it comes to finding the best stocks for the future, it can be a great strategy to look to the past. And while it’s certainly a good idea to look at how stocks are performing today, it can be just as important to see how they’ve weathered storms before.

So I’ve put ChatGPT to the test to see if its analysis based on data from the past could actually help investors today.

The process

First off, I went big. I wanted to look into companies that have been on the TSX for 20 years or more.

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

The bot then shared its selected stocks and the reasons it chose them:

1. “Royal Bank of Canada (TSX:RY): RBC has historically been regarded as a solid value stock due to its stable earnings, dividend payments, and attractive valuation metrics.”
2. “Suncor Energy Inc. (TSX:SU): Suncor has been 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 has been regarded as a value stock due to its stable cash flows, dividend payments, and defensive nature.”
4. “Canadian Natural Resources Limited (TSX:CNQ): CNQ has often been considered a value stock due to 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 automotive industry.”

How these stocks stack up today

Now this would perhaps be a good list, but we have to see whether these companies remain top value stocks to consider in 2023. To do this, we’re going to look at today’s numbers to see if they still fall within value territory.

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

With Suncor stock, it too is a moderate buy from around 10 analysts. It trades at 6.28 times earnings, which looks cheap but is really around the rest of its oil and gas peers. This includes CNQ stock, which trades at 8.41 times earnings as of writing. So again, Suncor is perhaps closer to fairly valued.

Where it gets interesting is with 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 during 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 dramatically, but it’s still overvalued at this point trading at 34 times earnings.

Foolish takeaway

Honestly, you could do far worse than these TSX stocks. While each seems to be either at fair value or on the expensive side, it’s a poor market at present. Each company certainly has stable cash flows, as well as the potential for long-term growth. Furthermore, they have been around for decades and should come out the other end of any recession relatively unscathed.

So while ChatGPT’s data may be dated, if anything the bot can certainly give you a solid jumping off point for finding stocks that could be worth researching on your own today.

The post Artificial Intelligence Bots Say These TSX Stocks Are a Buy (But Are They Really?) appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has positions in Royal Bank Of Canada. The Motley Fool recommends Canadian Natural Resources and Magna International. The Motley Fool has a disclosure policy.

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