The Motley Fool

3 Top TSX Stocks to Buy Right Now for Superior Returns

Image source: Getty Images.

Amid the pandemic, the technology and gold and silver mining sectors witnessed incredible growth this year. However, with the vaccine against COVID-19 getting closer to reality, I expect business and life to soon return to pre-pandemic ways. So, it’s the right time to buy the stocks that were deeply impacted by the pandemic. This article will discuss three beaten-down stocks that could deliver superior returns over the next two years.

Suncor Energy

The progress in vaccine development led oil prices to rise over 26% this month, bringing some relief to the beaten-down energy sector. The stock price of Suncor Energy (TSX:SU)(NYSE:SU) is up 53% for this month. Despite the increase, it still trades 46% lower for this year. The weak demand for crude oil and refined products amid the pandemic-infused shutdown and higher net losses have weighed on its stock price.

Meanwhile, Suncor Energy reported significant improvement in its recently announced third quarter compared to the second quarter. Its net losses declined from $614 million to $12 million, while its funds from operations increased from $488 million to $1.166 billion. Further, the company is working on cutting down on its operating and capital expenses. It expects to achieve the target of lowering its operating costs by $1 billion and capital cost by $1.9 billion this year, which is encouraging.

During its third-quarter earnings call, the management had stated that it had completed all its maintenance activities, and its assets were operating at full capacity. So, given the increased oil prices, higher production, and decline in its operating expenses, I expect Suncor Energy’s bottom line to improve.

Air Canada

The pandemic had led many governments worldwide to impose travel restrictions, which weighed heavily on the airline companies, including Air Canada (TSX:AC). Its passenger volumes fell 96% and 88% year over year in the second and third quarters, respectively. The company also burnt $2.54 billion of cash during the same period.

Meanwhile, the vaccine could increase passenger demand and prompt governments to lift travel restrictions, boosting its lucrative international travel. The encouraging news on the vaccine has already led Air Canada’s stock to rise 60% this month. Despite the rise, the company still trades over 50% lower for this year, proving an excellent buying opportunity.

Meanwhile, the airline companies are requesting federal aid, which includes low-interest loans or airport fees markdown. Although Air Canada’s financial position is healthy, the federal aid could greatly benefit the company.


My third pick would be Enbridge (TSX:ENB)(NYSE:ENB), which has lost 21% of its stock value this year. Amid the weak demand for crude oil, its liquid mainline throughput declined, lowering its financials and stock price. Meanwhile, the energy sector’s long-term outlook remains positive amid the improvement in economic activities following the unlocking measures and the progress in vaccine development.

Further, Enbridge earns 98% of its adjusted EBITDA from long-term fee-based contracts, which provides stability to its earnings and cash flows. It is also continuing with its $11 billion secured growth projects, with approximately $5 billion left to spend by 2022. The management is hopeful that these projects could generate 5-7% DCF-per-share annual growth until 2022.

Enbridge’s dividend yield looks attractive at 8%. It has been increasing its dividends consistently for 25 consecutive years at a CAGR of 11%. This year, Enbridge’s board hiked its dividends by 9.8%. With the expectation of improvement in its liquid mainline throughput amid higher oil prices and its high dividend yield, I expect Enbridge to deliver superior returns over the next two years.

Meanwhile, check out the following report for cheap stocks trading under $49.

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!

The Motley Fool owns shares of and recommends Enbridge. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.

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.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.