Haters are going to hate and smart investors are going to buy

The Canadian market has punished some big names lately, making two standout stocks look like bargains despite solid fundamentals.

Here are two of my top picks for investors looking for the most hated and defeatedly undervalued stocks on the market today, relative to their growth potential.

Telus

In the world of Canadian telecommunications giants Telus (TSX:T) is a company I’m starting to work with.

With some concerns surrounding the viability of Telus’ dividend (and its payout ratio in particular), this is a stock that has been battered over the past three years. Three years of falling yields have prompted some market participants to look for better dividend stocks in this environment.

That said, I’d say the combination of turmoil in the telecom sector and high debt fears that has driven this stock down is easing. After all, Telus is an ATM with a monster dividend (and one that looks much better than it did a few years ago).

With a price-to-earnings ratio now less than 20 times, this is a stock that I think represents excellent value. With more than two decades of consecutive annual dividend increases and a healthy operating margin, this is a stock that should continue to evolve over time. Personally, Telus is a company I would potentially invest in, but every investor has their own risk profile and time horizon – that’s what makes the markets.

Canadian National Railway

Another defensive Canadian stalwart I think investors should consider now is Canadian National Railway (TSX:CNR).

Shares of Canadian National have fallen 17% in the past year on fears of freight delays and trade tariff talks. These are headwinds that most investors can easily understand. However, I’d say this rail giant’s balance sheet screams buying.

CNR stock trades at a price-to-earnings ratio of less than twenty times and is definitely undervalued relative to peers. And with impeccable operating metrics (a return on equity of over 22% and a return on invested capital also in the double digits), this is a stock that I believe should continue to provide strong operating cash flow to support its robust 2.4% dividend yield.

As a way to deliver broader Canadian and North American growth over the long term, Canadian National remains a top stock that I think investors can put as a core investment in their portfolios. Personally, I’m waiting for a pullback from the recent rally to buy (I wish my research had brought me to this conclusion a week or two ago, but here we are).