While the markets may be marching to new all-time highs on the daily, it doesn’t mean there are no opportunities to be had. Certain stocks out there that have been crashing violently as the markets continued creeping higher. It’s these crashing TSX stocks that I’d look to go against the grain with for a shot at potentially outsized gains in the New Year.
Without further ado, consider Jamieson Wellness (TSX:JWEL), KP Tissue (TSX:KPT), and Warren Buffett’s gold miner pick Barrick Gold (TSX:ABX)(NYSE:GOLD), which are currently down 15%, 22%, and 28% from their 2020 highs. While each TSX stock has considerable negative momentum, each oversold name may have overextended to the downside.
Don’t say you weren’t warned to take profits in the top-tier Canadian VMS (vitamins, minerals, supplements) maker! Shares of the defensive health play have been resilient in this pandemic-plagued year. But the valuation, I thought, was a tough pill to swallow heading into the latter part of 2020.
Make no mistake: Jamieson is a wonderful company with its best growth days ahead of it. In the meantime, I suspect necessity hoarders may have to go through their supply of vitamins before they consider returning to the health section of their grocer on the hunt for Jamieson’s trusted green-capped products.
“I view the overvalued stock as overdue for a pullback and would urge investors to reconsider the name should it fall below $28 or so,” I wrote in a prior piece.
With the stock at $36 and change, down from $42, I’d look to nibble into a quarter position now, in case Jamieson can release results that justify its lofty 37 times earnings price tag.
KP Tissue was surging when toilet paper was being swept off the shelves during the first wave of COVID-19. As I described in prior pieces, the pull-forward in demand would likely cause a “demand hangover” later. With KPT stock in a vicious downturn, showing no signs of slowing down, I wouldn’t be against buying the dip as a hedge for a potential worsening of this crisis.
Who knows? The more infectious U.K. strain of coronavirus could spark another wave of panic-buying, and KPT stock may get another temporary bump back to the $14 levels. In any case, the 6.7% yield looks juicy for passive income investors who want to pay less to get more yield.
Finally, we have Barrick Gold, the hardest-hit of the names on this list. Warren Buffett recently trimmed his stake in the top-tier gold miner, which has likely exacerbated the recent bout of pessimism facing the stock. Gold prices have held steady, yet Barrick stock has been on the retreat thanks in part to the deterioration in the value of the greenback versus the loonie.
With Barrick stock, you’ll get a terrific hedge against a weakening loonie, as well as the volatility- and inflation-hedging benefits provided by gold and gold miners. While Barrick could have room to fall due to unfavourable currency moves (I think the Canadian dollar will have a tough time breaching US$0.80), I think low opportunity costs and hedging benefits are well worth the $29 price of admission.
If you're looking for opportunities in this uncertain market, I'd encourage you to consider the following
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Fool contributor Joey Frenette has no position in any of the stocks mentioned.