Cheap TSX stocks under $12 are few and far between. Many of them on the TSX Venture Exchange come with elevated magnitudes of risk that don’t properly compensate investors with the appropriate potential rewards. Undoubtedly, chasing low-cost stocks can lead many towards the path of a penny-stock investor. And while many penny stocks can evolve to become major multi-baggers with the hope of one day graduating to the big leagues (the TSX Index), such small-caps are likely to be buried beneath many less-than-stellar stocks on the TSXV.
In this piece, we’ll check out two under-$12 TSXV stocks that are actually pretty undervalued at current levels. They are considered small- and mid-caps with market caps below the $2 billion mark. Without further ado, enter StorageVault Canada (TSXV:SVI) and WeCommerce Holdings (TSXV:WE).
StorageVault Canada is probably one of the safest and least-volatile names on the TSXV. It’s a Canadian self-storage company that I view as a “REIT for your stuff.” In prior pieces, I’ve stated that COVID-19 headwinds were working against the self-storage industry. As you may know, the work-from-home trend sparked by the pandemic has pushed many folks to the suburbs. Lower-cost homes in the suburbs have essentially reversed the densification and downsizing trend that led the storage vault companies higher in the years before the pandemic.
As the pandemic goes endemic, people are going to be headed back to the office. And the return of the inner-city, I believe, could be a main driver of StorageVault shares over the next three to five years. Although the stock doesn’t seem to have lost a step, with the name back at a new all-time high of $5 and change, I wouldn’t at all be surprised if the name spiked in a parabolic fashion at some point down the road.
In any case, I view the $2 billion company as far too cheap, given that over the long run, the densification and downsizing trends will continue to fuel immense demand for self-storage units. For now, many workforces may encourage workers to stay at home amid the Delta wave. While I have no idea when the pandemic will end, I think that it’s just a matter of time before StorageVault really gets the wind to its back once again.
Recently, the company bought $8.7 million worth of storage space in Alberta and Ontario. With a healthy balance sheet, expect more value-creating M&A over the medium term.
WeCommerce is an intriguing name for Canadians interested in betting on the firms engaged in the Shopify ecosystem. The firm invests in businesses under the Shopify umbrella that help digital retailers be the best that they can be. Digital retail is a powerful trend, and if WeCommerce can continue adding value with its digital offerings, the returns could have the potential to be enormous.
For those interested in taking a sizeable stake, consider looking underneath the hood to the portfolio of value-adding software solutions, which include the likes of various apps and themes that are popular in the Shopify community. Indeed, WeCommerce is a far riskier name than the likes of a StorageVault. The $460 million company is fresh off a vicious 60% plunge. So, do be aware of the downside risks involved in the up-and-coming software company.
If you’re feeling venturesome, WeCommerce stock looks like a buy. But do be ready to average down should shares continue to sag.
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 owns shares of and recommends Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify.