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Canadians: 2 Top Turnaround Stocks in 2020

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The S&P/TSX Composite Index rose to record highs in 2019, but the year was not so kind to some of Canada’s top companies. Today I want to look at two TSX stocks that faced challenges last year. In this article I want to discuss why these stocks can bounce back in 2020.

BlackBerry

BlackBerry (TSX:BB)(NYSE:BB) witnessed through a turbulent decade in the 2010s. It saw its hardware business fall from grace as the smartphone market was flooded with more popular competitors.

The company hired turnaround specialist John Chen in late 2013. In the years since, Chen has managed to establish BlackBerry as a promising player in the software space. However, there is still a long road ahead.

Back in November, I’d suggested that investors should pounce on BlackBerry, as it was hovering around a 52-week low. Shares of BlackBerry have climbed 28% over the past three months as of early afternoon trading on January 24.

In the article, I’d also discussed BlackBerry’s footprint in fast-growing sectors like cybersecurity and automated vehicle software. These have the potential to propel BlackBerry to new heights in the coming years.

The company released its third-quarter fiscal 2020 results on December 20. It posted total non-GAAP revenue growth of 23% and non-GAAP Software and Services revenue growth of 26%.

In early January, BlackBerry announced that it had merged its Cylance ML security solution into its QNX software suite for autonomous vehicles. It also announced a new partnership with Damon motorcycles.

BlackBerry was a disappointment in 2019, but it’s still well positioned in two growth sectors to start this new decade.

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SNC-Lavalin

As frustrating as BlackBerry was in 2019, it doesn’t come close to the strife that SNC-Lavalin (TSX:SNC) experienced. Most Canadians, even those who don’t follow investment news very closely, will be acquainted with the scandal that impacted SNC-Lavalin in 2019.

In January last year, the stock suffered its largest single-day drop in 30 years after the company conceded that it would miss its full-year profit target. Nonetheless, in February last year I’d discussed why SNC-Lavalin was a buy-low candidate.

Shares of SNC-Lavalin have climbed 50% over the past three months at the time of this writing. The stock is still down 34% year over year. In the third quarter, the company worked on shoring up some of its key problems.

It reduced its debt by $2.4 billion with the sale of a 10.01% stake in Highway 407 ETR. SNCL Engineering Services segment revenue, EBIT, and EBIT ratio also improved from Q3 2018.

It won seven new engineering contracts in the quarter with an estimated value of approximately $500 million.

It will take years for SNC-Lavalin to claw back from the scandal it faced in 2019. Not only will it need to make strides with its underlying business, but it also needs to work to repair a shattered reputation.

Its decision to exit lump-sum turnkey construction contracting and focus solely on its engineering services business is showing some early signs of success.

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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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends BlackBerry and BlackBerry.

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