Poor market performance is ripe with opportunity. Stocks that before now had been trading at all-time highs are now suddenly trading far closer to 52-week lows. That said, it’s important for investors to consider more than just a cheap share price before buying up these discount stocks.
While you might get some reasonable gains, you could just as easily lose them again, making now the best time to pick up long-term stocks with a strong future outlook.
There are a number of quality stocks out there to consider, but two I would choose (and have) in a heartbeat are Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Royal Bank of Canada (TSX:RY)(NYSE:RY).
Enbridge
Enbridge is one of my first choices for a number of reasons. First off, it’s cheap. The stock is well below its fair value price of around $61 per share, giving it a potential upside of 36% as of writing.
The stock also has a solid dividend at 6.65%, giving investors $2.95 per share per year. That dividend has increased an incredible average of 22% per year over the last five years, with the company expecting further growth between 7-10% through to at least 2021.
Enbridge also has incredibly strong historical performance, even with the recent drop. Short-term problems have caused this stock to have a share price that has only increased 7% year to date.
First, there’s the oil and gas industry’s poor situation as a whole, then there was a pipeline explosion that tragically took one life. Both events have kept Enbridge down.
But looking long term, the stock is up 129% in the last decade. That’s a stellar performance, and likely due in great part to the company’s strong financial track record.
Even during this negative time, the company has come out with strong earnings reports, as because Enbridge is supported by long-term contracts that will keep it going for decades.
The future looks even more promising, as the company is completing $16-billion worth of projects by 2021, with even more after that. That makes a future share price and dividend yield increase almost a certainty.
Royal Bank
Royal Bank is my top choice out of the Big Six Banks for a reason. The stock is also cheap, with a fair value of $110, giving it a potential upside of 10% as of writing. Royal Bank also offers an amazing dividend of 4.2%, with investors receiving $4.20 per share per year.
That dividend has been increased at an average of 9.6% in the last five years, with the bank also predicting future dividend increases between 7-10%.
Royal Bank also has a history of strong performance, especially given the last recession. Canadian banks performed as some of the best in the world, rebounding within a year’s time to pre-recession levels.
With investors now nervous about an upcoming recession, these banks are a perfect option. Royal Bank, however, is Canada’s largest bank with a diverse portfolio in the lucrative areas of United States operations, and wealth and commercial management. This should continue to drive future growth.
It’s certainly helping already, as Royal Bank just announced strong earnings in its most recent quarterly report. Chief Executive Officer Dave McKay stated that he feels the bank is ready to take on the “strong headwinds” coming the bank’s way. The bank reported a record quarter of $3.3 billion in net income, up 5% from the same time last year.
Foolish takeaway
Both of these stocks offer an ideal option to stock up on cheap investments that will hold strong for the long term. Just getting back to fair value gives investors a ton of potential, but both Enbridge and Royal Bank are stocks that will likely give investors incredible gains for those will to hold on for years to come.
