Long-term investing in TSX stocks is traditionally one of the best ways to beat the market and grow your money. Warren Buffett is living proof just how much money can be made by investing for the long term and watching your money compound.
Despite long-term investing being straightforward in theory, in reality, there are several factors that make it very difficult to execute to perfection.
One of those factors is the emotions investors will have to deal with that will almost always try to force you to do something impulsive. It’s these impulses investors need to suppress, as usually doing the opposite of what you feel is the best decision to make.
TSX stocks crashing
In the last market crash, TSX stocks were falling rapidly. In just weeks, stocks fell by nearly 40%.
Naturally, most investors’ impulses would have been telling them to sell stocks, as every day tonnes of money was being lost.
However, that would have been the absolute worst thing you could have done. Instead, using those opportunities to buy low is a much better decision for long-term investors.
If you had bought TSX stocks at the time, you could have made yourself a hefty return in the three months that have followed.
Here are two TSX stocks that have already gained 100% from their March lows.
goeasy: Down 75% in the market crash
The first stock that has seen a massive recovery is goeasy (TSX:GSY). goeasy’s primary business model is consumer lending to below prime customers, so it’s understandable that the stock crashed by nearly 75% when the market tanked.
goeasy has been an impressive growth stock in the last few years. It had one of the most impressive track records of growth of all TSX stocks over the last few years. The stock even hit a high of $80 in February, just before the coronavirus pandemic caused massive panic selling.
Investors always knew that goeasy would be exposed if a recession was materialized. So, it’s not surprising that as the market was tanking, goeasy vastly underperformed.
The stock reached a low of $20.82 on March 19. That was extremely cheap; the last time the TSX stock was that cheap was 2016.
Since the market has become a lot more optimistic, and goeasy’s business has proven to be quite robust, the stock has bounced back considerably.
As of mid-day Thursday, the stock was trading around $56.5 representing a rebound of more than 150%.
Pembina: Down 70% in the market crash
One of the big reasons for the selloff being so rapid was because of the oil shock that hit the world economy at the same time that coronavirus was shutting things down.
This caused massive problems and huge losses in stock markets. At the time, some of the worst-performing stocks were energy stocks. So, it wasn’t all that surprising to see pipeline companies being sold off, too.
Before the market crash, Pembina was trading just over $52. The stock then declined by roughly 70% to a low of $14.92 on March 19.
For investors who were savvy enough to pull the trigger around $15, the returns have already been impressive. Pembina is up nearly 130% and is still offering investors a massive dividend of 7.2%.
Although it made sense to see energy stocks falling off, it should have been very obvious that a top business like Pembina would be able to weather the current environment.
Pembina’s stock hadn’t been that cheap in over a decade. More importantly, though, for those investors who’d bought at $15, the dividend is paying them a whopping 16.8% yield.
Bottom line: Know your high-quality TSX stocks
Both these examples go to show the advantage investors have by knowing which stocks are of the highest quality ahead of these instances.
If you can identify the best long-term businesses and keep those in the back of your mind, you’ll be ready to pull the trigger when the price is right.
This way, you know the company you are buying is extremely reliable, so you can use the opportunity to buy these high-quality investments severely undervalued.
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 has no position in any of the stocks mentioned. The Motley Fool recommends PEMBINA PIPELINE CORPORATION.