The Motley Fool

TSX Rally: If You’re Betting on a V-Shaped Recovery, Here Are 2 Stocks to Buy Now

Image source: Getty Images.

What a TSX rally we’ve had over the past few months. If you sold in May and went away, you’re probably pretty unhappy with your results right about now. While a V-shaped economic recovery is unlikely, investors need to remember that the stock market is not the economy.

The stock market is looking far ahead, and with the unprecedented amount of fiscal and monetary stimulus, it appears that we’ve averted a Great Depression-like scenario and that an abrupt recovery may be a likelier case, although I’m sure Warren Buffett would disagree after his sombre tone at Berkshire Hathaway‘s latest annual shareholder’s meeting.

In any case, if you’re bullish on the timely arrival of a vaccine and believe that a sustained V-shaped recovery is in order, it may be time take a risk-on approach with some of the harder-hit areas of the TSX Index.

Without further ado, consider placing a bet on the following battered stocks that could allow you the most significant returns in the event of a V-shaped recovery:

SmartCentres REIT: A top REIT to buy for a TSX rally

The retail scene took a beating amid the coronavirus crisis. Shopping malls, like SmartCentres REIT (TSX:SRU.UN) and retail outlets have been largely deserted amid coronavirus-induced shutdowns.

Some of the bigger bears believe that the coronavirus will be the final nail in the coffin for the brick-and-mortar retailers of yesteryear, as e-commerce kingpins rise up and fulfill the demands of consumers in the stay-at-home economy.

As the risk of contracting COVID-19, the insidious disease caused by the coronavirus continues dropping over the coming weeks and months, I’d bet on a resurgence in traffic at retailers. Many Canadian consumers have been suffering from cabin fever.

As it becomes safer to go outside, I suspect a vast majority of Canadians will be with their friends hanging out at the local Smart Centre, whether for a haircut, a bite to eat or to pick up that big-ticket discretionary item that wouldn’t make sense to purchase online.

SmartCentres REIT took a bit hit on the coronavirus, and as more evidence is suggestive that the shopping mall is not, in fact, dead, I suspect SRU.UN stock could be making a return to its pre-pandemic heights sooner rather than later.

Cenovus Energy: An energy rebound candidate that could soar on a V-shaped recovery

Up next, we have an energy stock that’s been decimated amid the coronavirus. Cenovus Energy (TSX:CVE)(NYSE:CVE) suffered a tremendous fall from grace, crashing over 81% from February 20 highs. That’s an absurd decline that’s overblown beyond proportion.

Today, the stock has nearly tripled in a partial recovery but remains significantly undervalued for those who see a V-shaped recovery.

As the economy bounces back, so too will the demand for oil. Negative oil prices were a shocker, but they’re simply unsustainable. I also think that today’s US$30 or so West Texas Intermediate prices as unsustainable and think oil prices could be back at pre-pandemic levels as soon as year-end. Amid such an energy relief rally, I view Cenovus as one of the names that have the most to gain.

The stock is severely oversold, undervalued, and is nothing short of a bargain with the stock trading at 0.42 times book. While the name will undoubtedly be volatile, if you’re looking to maximize your upside in a V-shaped recovery, Cenovus is the horse to bet on.

Speaking of ample upside, you need to check out these following stocks curated by the team here at the Motley Fool Canada!

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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 owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Smart REIT and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares).

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.