3 Breakout TSX Stocks to Buy Early

The definition of a breakout stock can be quite different from trading and investing perspective, with the latter being more “flexible.”

| More on:
Hand arranging wood block stacking as step stair with arrow up.

Image source: Getty Images

Traders define a breakout stock as a security that moves up, breaking through the resistance (an established high point) or moving down, going below the support (an established low point). This definition of a breakout stock makes more sense from a trader’s perspective. For investors, we can be a bit more flexible and consider stocks that might break out and grow beyond their current “normal” valuation as part of this pool.

A marijuana stock

Aurora Cannabis (TSX:ACB)(NYSE:ACB) is almost a cautionary tale about investing in marijuana companies in Canada. The stock, which grew almost 4,000% between mid-2015 and early 2018, has now dropped down to a valuation that’s 95% lower than its peak valuation. But though the scale of Aurora’s fall is quite staggering, the pattern is not.

Most marijuana stocks in the country followed the same pattern: hyped-up growth than a hard fall. But now that the international legal marijuana market is expanding, with Germany joining the ranks, and the U.S. expected to come around soon, Aurora Cannabis might get to leverage its four medical and six consumer brands and start capturing the international market. A sizeable growth in revenues might be followed by decent growth in stock.

A hydrogen fuel cell company

Ballard Power Systems (TSX:BLDP)(NASDAQ:BLDP) is a powerful player in the hydrogen fuel cell market, which itself is quite nascent, and it was a decent growth stock up until the pandemic. After the pandemic, the stock rose too sharply (about 360% in fewer than 10 months), and then it fell. The good news is that it has reached (or will soon reach) the levels it would have been at if it weren’t for the pandemic.

Ballard’s breaking out is tied to hydrogen becoming a mainstream fuel in the green economy of the future. It does offer better power density than conventional EVs, and the “fuel” can be transferred in minutes and doesn’t require hours for charging. It has certain challenges to overcome (cost, for one), and if it does, the hydrogen economy might grow quite powerfully, and companies like Ballard would see demand spike.

An AI company

AI and data are the future of tech. That’s the premise behind adding Fobi AI (TSXV:FOBI) to this list. It’s a data-intelligence company that allows businesses to use the data they have to make smarter business decisions and engage their customers better. It’s one overlap of data and the corporate world that has seen a lot of development, but the full potential of which hasn’t been unleashed yet.

Fobi AI stock hasn’t delivered on the promise and potential of AI yet. Since its inception, the stock stayed quite stagnant for a couple of years, and when it grew, it was more because of the sector dynamics than the company’s merits itself. The stock has already slumped back and might continue to slide down for a while yet. That would be a good time to buy it and wait for Fobi AI’s business applications and solutions to trigger organic growth.

Foolish takeaway

All three companies have the potential to break out when the time and circumstances are right, which makes now the perfect time to buy when the stocks are not getting the highlight their “potential” deserves. But it also makes them longshots, so make sure you don’t expect sure growth from these stocks. They (most likely) will enter their bull market phase, but it might not be when you need them to.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Tech Stocks

Tech Stocks

Your Future Self Will Thank You for Buying Lightspeed Stock in 2023

Here’s why you may want to add LSPD stock to your portfolio in 2023 to hold it for the long…

Read more »

a person watches a downward arrow crash through the floor
Tech Stocks

Don’t Wait for a Market Crash: These 2 Top Stocks Are on Sale

Waiting for a market crash can take away the opportunity to buy early in the market rally while growth stocks…

Read more »

Coworkers standing near a wall
Tech Stocks

What’s Next for Magnet Forensics Stock After Hitting a 52-Week High Last Week?

While TSX tech stocks have lost around 30% last year, Magnet Forensics stock has soared 82%.

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Tech Stocks

Have $500? 2 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

Got $500 to invest? Consider buying these stocks that are too cheap to ignore.

Read more »

little girl in pilot costume playing and dreaming of flying over the sky
Tech Stocks

Got $1,000? Buy These Hot Growth Stocks Before They Take Off 

Growth stocks are best when bought at their lows or early in the rally. Now is the time to buy…

Read more »

Growing plant shoots on coins
Tech Stocks

2 Growth Stocks to Invest $100 in Right Now

Even with the market riding a bullish rebound, you don’t need a whole lot of cash to invest in growth…

Read more »

work from home
Tech Stocks

Could Lightspeed Stock Be a Big Winner in 2023?

Investors can capitalize on Lightspeed’s low valuation and benefit from the recovery in its price.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Tech Stocks

TFSA Passive Income: How I’m Investing to Make $2,000/Year From Dividends

I am increasing my dividend income by investing in dividend stocks like the Toronto-Dominion Bank.

Read more »