Bargain hunters are taking advantage of the 2018 sell-off in the equity markets to add quality stocks to their self-directed TFSA portfolios.
Let’s take a look at three companies that should be attractive buys right now.
TC Energy (TSX:TRP)(NYSE:TRP)
TC, formerly TransCanada, is a top player in the North American energy infrastructure sector with $94 billion in assets that include oil pipelines, natural gas pipelines, natural gas storage, and power generation located in Canada, the United States, and Mexico.
Large pipeline projects are facing increased opposition in Canada and the U.S., and that has investors somewhat concerned about long-term growth in the industry, but TC isn’t short on development opportunities.
In fact, the company has $36 billion in commercially secured projects under development through 2023. As the new assets are completed and go into service, management intends to increase the dividend by at least 7% per year through 2021, and investors should see strong payout growth continue beyond that time frame. The company has increased the distribution in each of the past 18 years.
The stock currently trades at $53 per share compared to $61 at this time last year. Investors who buy today can pick up a 5.2% yield.
Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM)
It is interesting how quickly sentiment can shift in the financial markets. A few months ago, CIBC traded for $124 per share. Today, investors can pick it up for $103.
Fears about a slowing global economy and a trade war between the U.S. and China are primarily responsible for the slide in bank stocks, but the pullback appears overdone.
In the case of CIBC, the negative sentiment could prove to be a bonus. The Bank of Canada is now expected to sit on its hands in 2019, rather than raise interest rates three times as previously expected. A pause in rate hikes would give Canadian homeowners more time to adjust to rising mortgage costs and take some of the risk out of CIBC’s large mortgage portfolio.
A soft landing is now the most likely scenario for the Canadian housing market, and that should be good news for the banks.
CIBC remains very profitable, and the U.S. the company assets added in 2017 provide a nice revenue hedge. The stock is trading at an attractive 8.9 times trailing earnings, and the dividend should be safe.
At the time of writing, CIBC provides an annualized dividend yield of 5.2%.
Cenovus Energy (TSX:CVE)(NYSE:CVE)
Cenovus is the contrarian pick of the group. Pipeline bottlenecks and low Western Canadian Select prices remain an issue for the company, but the sell-off in the stock is likely overdone, given the scope of the asset and resource base.
Cenovus bought out its oil sands partner in a $17.7 billion deal in 2017. At the time, the move didn’t sit well with investors, and the subsequent drop in oil prices hasn’t helped the mood. However, this company has significant potential to deliver attractive returns over the long term.
If you are an oil bull, Cenovus deserves be on your radar as a contrarian buy for your TFSA today.
The bottom line
Sharp market pullbacks have historically turned out to be good opportunities for buy-and-hold investors. TC, CIBC, and Cenovus appear oversold today and could deliver significant returns in the coming years.
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Fool contributor Andrew Walker has no position in any stock mentioned.