Buy These 3 Oversold Stocks NOW

A total of 41 TSX stocks lost 10% or more of their share prices in February, including Dollarama Inc. (TSX:DOL). Here are the three oversold stocks to buy now.

A quick screen of TSX common stocks that lost at least 10% in February and have market caps greater than $500 million produces a list of 41 companies.

While some of the stocks experiencing significant declines last month deserved the correction — Element Fleet Management Corp. (TSX:EFN) for disappointing investors, and Dollarama Inc. (TSX:DOL) for merely running out of steam — but others got knocked down as part of an overall 2.8% decline in the TSX Composite for the month.

That’s why I believe it’s time to buy these three oversold stocks now.

Cara Operations

When Cara Operations Ltd. (TSX:CARA) announced it was buying Keg Restaurants Ltd. for $200 million January 23, 2018, it was trading just under $25. The news was met enthusiastically by investors, pushing its stock over $27, only to see all of that goodwill disappear in February; it now trades below where it was immediately before announcing the critical acquisition.

I’ve always thought Cara was a misunderstood stock that’s better than its $24 price tag. Now that it’s in business with a well-run Keg operations and Fairfax Financial Holdings Ltd. holding a majority of the votes, I see $30, possibly by the end of 2018.

Maxar Technologies

Fool.ca contributor Joseph Solitro did an excellent job February 26 explaining why Maxar Technologies Ltd. (TSX:MAXR)(NYSE:MAXR) saw its stock drop by more than 12% after announcing its fourth-quarter earnings.

While it had a good 2017, the company’s outlook for 2018 included a 2-4% decline for the year — enough to send investors packing.

I’ve always found that investors tend to overreact to negative news with equal enthusiasm to good news. In Solitro’s estimation, Maxar’s stock is a bargain at 12.3 times fiscal 2017 adjusted EPS of US$4.16.

For me, Maxar’s cash flow from operations is what stands out. It was US$130.4 million in 2016; the company believes it could be as high as US$400 million in 2018, more than 200% higher in just 24 months.

MAXR stock might be down, but it’s definitely not out.

BRP

For those unfamiliar with BRP Inc. (TSX:DOO), it is the recreational products business formerly owned by Bombardier, Inc. until being sold in 2003 to an investor group that included Bain Capital and the founding Bombardier and Beaudoin families. They proceeded to take it public a decade later at $21.50; it’s up 114% since then, despite the 12% correction in February.

The big concern for investors at the moment is a potential trade war that could affect how many snowmobiles and ATVs it sells in the U.S. and the profits it makes from each sale.

While this is a serious concern, I’m confident the company’s move to open a big office in Texas is part of its solution to the what-if scenario.

If DOO falls into the mid to low $30s, I’d be backing up the truck. As it is, I believe its stock is oversold given how well the business is performing at the moment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Will Ashworth has no position in any stocks mentioned. Fairfax and Maxar are recommendations of Stock Advisor Canada.  

More on Investing

A plant grows from coins.
Dividend Stocks

3 Cheap Canadian Stocks That Offer 7% Dividend Yields

Retirees looking to build pension portfolios have an opportunity to buy great TSX dividend-growth stocks at discounted prices.

Read more »

Man making notes on graphs and charts
Investing

3 Magnificent Stocks That I’m “Never” Selling

These three stocks have struggled as of late, but there’s no chance I’m selling anytime soon.

Read more »

dividends grow over time
Dividend Stocks

2 Dividend Stocks That Can Generate $2,000 in Passive Income by 2025

Investing in high-dividend stocks such as Whitecap can help you generate $2,000 in annual passive income by 2025.

Read more »

tsx today
Stock Market

TSX Today: Why Canadian Stocks Could Fall on Thursday, May 30

Falling commodity prices, rising bond yields, and economic risks may continue to weigh on TSX stocks today as investors watch…

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Investing

2 No-Brainer Stocks to Buy With $5,000

These two stocks could be excellent buys amid this uncertain outlook.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Stocks for Beginners

5 Canadian Stocks to Hold in Your TFSA For Decades

The TFSA is the perfect place to compound wealth over decades. Don't pay any tax on these top five growth…

Read more »

edit Woman calculating figures next to a laptop
Dividend Stocks

Should You Invest in BCE Stock for its Dividend?

BCE stock is not yet out of the woods. But this article could change your perspective about the stock and…

Read more »

sale discount best price
Dividend Stocks

Bargain Hunting for Dividends: 3 High-Yield Stocks Haven’t Been This Cheap in Years

Enbridge (TSX:ENB) stock's key enterprise value multiple reached a new multi-year low recently. BCE remains a high-yield dividend play while…

Read more »