The coronavirus crash has completely imploded some businesses while sparing others. This piece will have a look at two TSX stocks that have lost more than 70% of their value since the coronavirus crash begun on February 20.
Both names have since bounced back modestly, but with a coronavirus-induced recession (or depression) that will stick around after the coronavirus pandemic ends, investors may want to consider dollar-cost averaging into the beaten-up names if they’re on the hunt for deep value.
Without further ado, consider the following severely battered TSX stocks that brave value investors may want to consider nibbling on the way down.
Cenovus Energy (TSX:CVE)(NYSE:CVE) has previously been a staple in many Canadian-centric mutual funds. The integrated oil company made some poorly timed moves in the past, and it’s been a perpetual falling knife ever since. The TSX stock has been crashing non-stop since the 2014 rout in oil prices. The 2020 oil crash caused by a demand shock from the coronavirus and Saudi-Russia tensions have caused Cenovus to implode further after years of share price consolidation.
The Saudi-Russia feud has been since resolved with a new deal to cut production, but that failed to move the needle on oil prices, with WTI briefly falling into the teens. For Albertan oil companies like Cenovus, there’s pressure from all sides right now, and that’s a huge reason why the TSX stock lost 81% of its value from peak to trough on the coronavirus crash, bringing shares now down well over 90% from their pre-2014 highs.
Cenovus has $8.6 billion worth of total debt sitting on its balance sheet, which is sizeable, but not detrimental to the firm’s future, even at today’s depths. The company slashed its capital budget once again while axing its dividend to save more cash, as the tides go out further on the oil patch.
With oil prices as long as they are, there will be a slew of bankruptcies in the oil patch, but Cenovus looks to be in a position to survive long enough to ride a potential rebound, as the company is pulling out all the stops to remain liquid.
At $3 and change, Cenovus is a name that represents very deep value at a staggering 0.2 times book. If deep value is what you want, I’d nibble on the name here and on any further weakness.
NFI Group (TSX:NFI), a manufacturer of transit buses, fell over 71% from peak to trough on the coronavirus crash. The company was in a world of pain prior to the pandemic thanks to operational hiccups and a broader industry slowdown.
Altogether, NFI stock is down 76% from its all-time high at the time of writing and is back at lows not seen since 2015. As a producer of long-lived durable goods, it’s going to be a long road to recovery as the discretionary industrial as we head into a potentially severe recession.
Discretionaries like NFI ought to be avoided headed into an economic downturn. But as you may know, the stock market is forward-looking, and the extent of the recent damage done to the TSX stock may prove to be excessive, as more than just a recession looks to be baked in with NFI at $14 and change.
NFI is the type of discretionary play that could take more than five years to fully recover, but when the economy turns a corner, watch out, because the relief rally could be epic!
If you have five years to wait for the recession to come and go, you may want to nibble on NFI at weakness, while the stock trades at 0.8 times book. That’s deep value that only a crash can provide.
Stay hungry. Stay Foolish.
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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends NFI Group.