Got $1,000? Buy These 4 Under-$20 Canadian Stocks for Superior Returns

Given their growing addressable markets and growth initiatives, these four under-$20 stocks could deliver superior returns over the next two years.

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Despite rising COVID-19 cases, the Canadian equity markets continue to be strong, with the S&P/TSX Composite Index trading 9.6% higher for this year. Investors’ hope of strong demand recovery and improvement in corporate earnings has driven the equity markets higher. Amid the improved investors’ optimism, here are four Canadian stocks that you can buy under $20 for superior returns.

Absolute Software

Amid the recent pullback in technology stocks, Absolute Software (TSX:ABST)(NASDAQ:ABST) has lost over 27% of its stock value from its February highs. The decline has dragged the company’s valuation into cheaper levels compared to its peers. Meanwhile, remote working and learning growth has increased the demand for endpoint security and management services, benefiting Absolute Software.

The company is also working on launching innovative products to capture the growing addressable market. Further, the company’s management has set upbeat guidance for 2021. The company’s top line could grow at 12-14% this fiscal year, while its adjusted EBITDA margin could come in the range of 22-24%. As of December 31, the company’s cash and cash equivalents stood at $131.6 million. So, the company is well equipped to support its growth initiatives. Additionally, the company pays dividends at a healthy forward yield of 1.8%.

Savaria

Second on my list would be Savaria (TSX:SIS), which provides accessibility solutions worldwide. The company’s stock price has increased close to 24% higher for this year. Its strong performance and completion of the acquisition of Handicare Group appear to have led the company’s stock price to rise. Despite the rise, its valuation still looks attractive, with its forward price-to-sales multiple standing at 1.8.

With the growth in the aging population, the demand for Savaria’s products could rise, boosting its financials. Further, the acquisition of Handicare Group has expanded Savaria’s geographical footprint and provides access to manufacturing facilities in Europe and Asia. So, I believe the uptrend in Savaria’s stock price to continue. It also pays monthly dividends, with its forward dividend yield standing at 2.7%.

BlackBerry

My third pick would be BlackBerry (TSX:BB)(NYSE:BB). Amid increased remote working and learning, cybersecurity spending could rise in the coming quarters, benefiting the company. Supported by its innovative products, the company has acquired many blue-chip clients. Meanwhile, it has recently partnered with IBM to expand the reach of its Spark platform to organizations across Canada.

BlackBerry is also focusing on expanding its footprint in the autonomous EV market. So, its partnerships with Amazon Web Services and Baidu could be crucial. Meanwhile, the company’s management expects both its Cybersecurity and BTS verticals to deliver double-digit growth in fiscal 2022. Given its multiple growth drivers and the steep fall in its stock price, I expect BlackBerry to deliver high returns over the next two years.

Aphria

My final pick would be Aphria (TSX:APHA)(NASDAQ:APHA), which has managed to report positive adjusted EBITDA for seven consecutive quarters. Amid the strong performance from its dried flower and vape segments, the company has acquired a healthy market share in the Canadian recreational markets. Further, through its acquisition of SweetWater, the company looks to expand its footprint in the lucrative U.S. cannabis market.

Meanwhile, Aphria’s merger with Tilray is progressing well, with Aphria’s shareholders voting in favour of the merger. Tilray’s shareholders will vote on April 30. The merger could solidify the combined entity’s market share in both Canadian and international markets and deliver $100 million in synergies within two years of completing the deal. So, the company’s growth prospects look healthy.

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.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon and Baidu. Tom Gardner owns shares of Baidu. The Motley Fool owns shares of and recommends Amazon and Baidu. The Motley Fool recommends BlackBerry, BlackBerry, and Savaria and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.

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