Last week’s market crash was an extreme wake-up call for investors who had gotten used to more than a decade of stocks on a bull run. While some people argue this is just the start, others have argued this is an overreaction. While it’s impossible to tell at this early stage how things will turn out, one thing we know for sure is that the rapid de-escalation in stock values has created major opportunities.
There were a number of stocks that were overvalued before their share prices came down that remain overvalued today. There are also a number of stocks that were already undervalued or trading at fair value that now look extremely attractive after the sell-off in their shares.
Canadian Tire was already one of the hottest stocks on the TSX, having just reported strong earnings only a few weeks ago, which, at the time, gave Canadian Tire’s stock a bit of a boost.
All those gains were wiped out last week, however, as Canadian Tire reached a new 52-week low.
One of the reasons that its shares have been sold off is because of the growing concern some investors have with Canadian Tire’s business, even though Canadian Tire has shown time and time again that it can manage its risk exceptionally.
The sell-off and general worry by some investors have created a major opportunity, as Canadian Tire now trades at massive discount at just a 10.6 times earnings multiple, and with its dividend yielding roughly 3.4%.
Canadian Tire is one of the top brands in Canada, so to be able to gain exposure today at just over 10 times its trailing 12-month earnings is a steal, and one that will give you major opportunity for long-term capital appreciation.
Inter Pipeline is an energy infrastructure company with oil sands pipelines, conventional pipelines, a bulk storage business, and NGL processing assets.
It’s one of the best energy infrastructure businesses in Canada; it is known among investors as one of the top dividend-paying companies to own for passive-income seekers.
84% of the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) comes from cost-of-service or fee-based contracts, which helps reduce risks to the company’s cash flow and gives investors a better belief that the company can sustain the dividend.
The dividend today is yielding upwards of 8.5%, which is extremely attractive but not as attractive as the fact that over the last 10 years, Inter Pipeline has grown its dividend at a 7.3% compounded annual growth rate.
Inter Pipeline has more than $3.7 billion worth of projects in development and with its major 8.5% dividend, buying shares at a price-to-earnings ratio of just 15.2 times today seems like a high-value proposition to me.
North West Company
North West Company is a consumer staple that owns grocery stores and supermarkets that serve remote communities in northern and western Canada, Alaska, and the Caribbean.
It’s a great business to own especially with uncertain times ahead, because its business is relied upon by many remote communities to provide them with everyday living essentials.
The fact that North West is so crucial to the well-being of many different communities gives it a major competitive advantage and ensures that no matter the income levels of its shoppers, much of its business will be unaffected, even in the worst of recessions.
On top of everything else, the company is also a Dividend Aristocrat, so you know North West is one of the best long-term dividend-paying stocks on the TSX.
Its dividend is currently yielding more than 5.1%, and the company currently trades at a price-to-earnings ratio of just 15.9 times.
When major market corrections like last week’s takes place, investors’ first instinct should be to look for some of the opportunities it’s created, allowing you to invest in top Canadian stocks for well below fair value.
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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 Daniel Da Costa owns shares of THE NORTH WEST COMPANY INC.