Investors looking to beat the markets over the long term need to adopt a contrarian mindset by reaching for the Canadian stocks that most others wouldn’t dare touch. In this piece, I’ll discuss two names that Bay and Wall Street analysts see soaring over 30%. Their consensus price targets imply north of 30% upside, with some bull targets that imply upside well north of 60%.
So, don’t let anyone tell you that there’s no value to be had in today’s stock market because it seems frothy. As a do-it-yourself stock picker, you can scoop up the bargains while passing up on overvalued stocks or bubbles. Without further ado, let’s get right into the names. But be warned, each undervalued stock is not for those who are strangers to immense volatility.
NFI Group: A stealthy EV stock that could soar
Topping off the list, we have Canadian bus maker NFI Group (TSX:NFI), a company that’s suffered a massive fall from grace, which started well before the pandemic struck. The real pain started back in 2019 when the company suffered from a steep drop in orders. Orders were down by over 50% on a year-over-year basis, causing shares to crumble like a paper bag.
NFI is a cyclical on steroids. Booms and busts are to be expected. As we enter the next cyclical upswing, NFI stock could be in a unique position to explode higher, as orders ramp up with a fury.
With many people quarantining and staying at home, commuting has taken a hit to the chin. The pain won’t last forever, though. Once enough jabs are given in arms, I think bus orders could surge, as governments look to ramp up infrastructure spending.
President Joe Biden is going big on infrastructure, with an emphasis on green initiatives. NFI isn’t just a run-of-the-mill bus maker; it’s a play on energy-efficient vehicles. For localities looking to cut their carbon emissions, such green means of transportation will be a must.
Orders are recovering modestly, and they may be on the cusp of exploding. In any case, the Wall Street consensus is calling for NFI stock to hit around $37, implying just over 30% worth of upside from today’s levels.
Cenovus Energy: A bruised Canadian stock could have 30-60% upside, according to Wall Street
Cenovus Energy (TSX:CVE)(NYSE:CVE) is another beaten-down Canadian stock that could outperform in a big way this year. Like NFI, Cenovus is down considerably from its highs, no thanks to the coronavirus crisis, which was a kick to Cenovus’s business when it was already down and out. As the tides turn (they’ve already started), Cenovus could be ready to soar, perhaps to unthinkable heights on the back of oil’s latest rally.
The Canadian integrated energy company has made advancements in the more efficient steam-assisted gravity drainage (SAGD) process, just one of many efforts that could cause production costs to lower over time. I guess you could say Cenovus is quite the innovator, although its stock would suggest otherwise.
Shares of Cenovus trade at a nearly 30% discount to its book value at the time of writing. And Wall Street analysts think the stock could surge to $12.64, implying 34% upside from $10, where the stock sits today. The most bullish estimate is calling for shares to soar to $16 — a whopping 60% gain.
Now that things are looking up, I think investors would be wise to load up on shares ahead of an environment that some like to describe as the Roaring ’20s.
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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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends NFI Group.