Even if the TSX Index has rallied more than 35% since March, few quality stocks are still trading close to their record lows. Investors who are sitting on some cash can consider putting it in these TSX stocks. With their strong fundamentals and attractive growth potential, investors can generate a handsome reserve over the long term.
While the air traffic is not expected to normalize anytime soon, many big airline companies might continue to struggle in short to intermediate term. Thus, investors can consider shares of CAE (TSX:CAE)(NYSE:CAE), which offer a much better risk/reward proposition.
CAE is a Canadian company that develops simulation technologies for civil aviation, defence, and healthcare segments. The company generates approximately 45% of revenues from the healthcare and defence segments.
Its aviation business might take time to stabilize due to the pandemic, but defence and healthcare segments continue to offer strong growth potential.
The company’s diversified revenue base, a large global presence, and a solid balance sheet will likely support CAE’s relatively fast recovery. In the last five years, CAE stock has soared almost 50%.
CAE stock is still trading 50% lower to its pre-pandemic levels and looks fairly valued from the valuation perspective at the moment.
Wheaton Precious Metals
Streamers like Wheaton do not own or operate mines and thus are relatively low-risk, high-margin businesses. Wheaton investors can enjoy higher precious metals prices with a much lower risk profile against a traditional mining company.
Gold prices have been rallying from the last few months, and that has notably boosted gold miners’ bottom lines. The trend is likely to continue, which will also drive precious metals stocks higher.
Wheaton stock has soared more than 250% in the last five years. So far this year, it has surged almost 55% and looks a bit stretched from the valuation perspective. However, a bullish outlook for gold and Wheaton’s decent risk/reward proposition make it an attractive bet for investors.
It exhibited superior revenue growth in the last three years, notably exceeding the industry trends. Importantly, last quarter’s earnings exceeded expectations and showed that the outdoor apparel maker is better placed to weather the crisis.
Canada Goose’s geographically diversified revenue base makes its top line relatively stable. Its expansion into direct-to-consumer sales with both online platforms and with brick-and-mortar stores has worked out pretty well recently. Continued efforts on the same front will most likely speed up its earnings growth further.
As economies reopen after weeks-long lockdowns, the parka manufacturer will soon see its revenues normalizing. Online sales will also support its top-line growth to some extent.
Canada Goose stock is currently trading 36 times its estimated earnings, which indicates a premium. However, it might be warranted given the strong earnings potential.
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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 Vineet Kulkarni has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Canada Goose Holdings.