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Are You Stuck With These 3 Worst-Performing TSX Stocks?

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The year 2020 had indeed been crazy. The stock markets showed one of the best recoveries of all time, despite the pandemic shock. Some TSX stocks doubled or even tripled in the last six months, while some are not even close to their pre-pandemic highs.

Let’s take a look at three laggards of 2020. We will also see what investors should do with them moving into 2021.

Air Canada

The pandemic indeed turned the tables upside down for the country’s biggest air carrier Air Canada (TSX:AC). Although the stock has rallied 65% since late October on the vaccine news, it has lost 53% so far this year.

The flag carrier was the best-performing stock in the last decade. Its operational efficiency and leading market share raked in growing revenues and boosted profitability post-2008 crisis. Fast forward to 2020, the pandemic took the global aviation sector many years backwards and wiped off many years’ profits.

However, the mass vaccine distribution could bring in a notable economic recovery in the year 2021. Although the air traffic demand and airlines’ profitability could take years, Air Canada is an attractive investment opportunity for long-term investors.

Its strong balance sheet should make it through the crisis. Also, smaller players will likely be more vulnerable post-crisis, making bigger players like Air Canada even more dominating.

Air Canada stock still looks overvalued, despite the recent correction. The stock might witness more volatility in the short term, but it remains a top buy for long-term investors.

Aurora Cannabis

Once-hot pot stock Aurora Cannabis (TSX:ACB)(NYSE:ACB) continued to lose its sheen in 2020. It lost around 66% this year, making it one of the worst-performing stocks of 2020.

Higher cash burn, strained revenue growth, and an unclear outlook weighed on the stock this year. The management expects the company to turn EBITDA positive in the current quarter. However, with rising competition and dwindling top line, that could be an uphill climb for Aurora Cannabis.

ACB stock is trading at a price-to-sales valuation ratio of six and looks overvalued. Many peer cannabis stocks are trading at a lower valuation multiple and are fundamentally sound. Aurora Cannabis’s revenue growth will be one of the vital factors shaping the stock’s recovery next year.

Vermilion Energy

The energy sector underperformed this year as well. Canadian energy company Vermilion Energy (TSX:VET)(NYSE:VET) is among the laggards and has lost almost 75% year to date.

Vermilion Energy produces oil and natural gas from its assets in Europe, North America, and Australia. It has lost $1.4 billion so far this year amid lower energy demand. It also suspended dividends in April this year when cash retention became a necessity for the company.

The stock has nearly doubled after bottoming out in October. However, energy stocks like Vermilion could see an exaggerated impact of the crude oil movement next year. While crude oil is expected to reach $50-$55 per barrel levels, Vermilion might see some strength.

Bottom line

These three stocks were some of the worst-performing stocks of 2020 on the TSX. While all three look like risky plays at the moment, Air Canada among these has the potential to deliver handsome returns in the long term.

Forget these laggards. Consider our top recovery plays here...

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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.

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