RRSP Investors: 2 Undervalued Stocks to Buy in December 2021

These top TSX stocks look undervalued right now for a retirement portfolio.

| More on:
Senior couple at the lake having a picnic

Image source: Getty Images

The stock market’s recent pullback is finally giving RRSP investors a chance to buy attractive TSX dividend stocks at reasonable or even undervalued prices.

Suncor Energy

Suncor (TSX:SU)(NYSE:SU) is a major player in the Canadian energy sector with oil sands, refining, and retail businesses that drive revenue all along the value chain.

The integrated nature of the company is a key reason Suncor’s stock historically held up better than its pure-play producer peers when oil prices dipped on situations of oversupply. The pandemic has been unique, however, in that prices plunged due to falling fuel demand. As a result, all of Suncor’s groups took a beating last year and the stock tanked.

The story in 2021 is much better. Gasoline demand in Q3 2021 came in about 7% below its level in the same period last year. Suncor’s Q4 results from the refining and retail operations should be solid and the production business continues to generate strong profits, even after the 13% plunge in the price of West Texas Intermediate (WTI) oil on November 26.

While new travel restrictions announced to prevent the spread of the Omicron variant could put a dent in the rebound until we find out whether vaccines work well against the new strain, the downturn could be short-lived.

Looking ahead, fuel demand should be strong through 2022 and 2023 and the recent dip in the price of oil might simply be a pause before a new surge next year. Pundits are still calling for a possible run to US$100 per barrel.

Suncor appears cheap right now at $32 per share. The stock traded for $44 in early 2020 when oil was much lower than its current price. Investors who buy now can pick up a solid 5.25% dividend yield and wait for the next leg of the energy rebound.

Barrick Gold

Barrick Gold (TSX:ABX)(NYSE:GOLD) isn’t the first name that normally comes to mind when investors think about dividend stocks, but the gold miner has been a dividend star in recent years. In fact, Barrick Gold has tripled the annualized payout since September 2018 to US$0.36 per share. In addition, the board gave shareholders a special US$750 million return of capital in 2021. That worked out to another US$0.42 per share.

Gold is down about 14.5% from its 2020 high. Barrick Gold’s stock price is off about 37% over the same time frame. The share prices of the miners normally move more than the price of the metal, but the sell-off in Barrick Gold looks overdone.

Why?

The company has a strong balance sheet and is replacing reserves at an impressive rate. All-in sustaining costs for its gold production in Q3 2021 came in at US$1,034 per ounce. Gold trades near US$1,780 at the time of writing and was recently at US$1,870. At current prices, Barrick Gold generates strong margins and the Q4 free cash flow number could be better than the US$481 million the company generated in the third quarter.

Gold is widely viewed as a hedge against inflation and as a safe-haven asset. The inflation story has not changed in the past few days, despite the new Omicron fears, and more market volatility could be on the way as additional news of the spread of the variant hits headlines in the coming weeks and months. As a result, the recent pullback in gold could be short-lived. It wouldn’t be a surprise to see gold take a run at US$2,000 per ounce again by the end of next year.

If you are a gold bull, Barrick Gold stock looks undervalued today.

The bottom line on cheap stocks for RRSP investors

Suncor and Barrick Gold are leaders in their industries. The stocks appear cheap right now and investors could see total returns outpace the broader market in 2022.

If you have some cash to put to work in a self-directed RRSP, these stocks deserve to be on your radar.

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Andrew Walker owns shares of Suncor.

More on Investing

Growing plant shoots on coins
Tech Stocks

2 TSX Growth Stocks I’d Buy and Hold Forever

Investors can buy these growth stocks at significant discount and benefit from the steep recovery in their prices.

Read more »

Piggy bank next to a financial report
Investing

3 Top TSX Stocks to Add to Your TFSA or RRSP in October 2022

Are you looking for stocks to add to your TFSA or RRSP this month? Here are three top picks!

Read more »

Nickel ore is mined from the ground.
Metals and Mining Stocks

3 Top TSX Metal Stocks to Buy in October

Given their healthy growth prospects and attractive valuations, these three metal stocks could be excellent additions to your portfolio.

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

1 Energy Stock I Bought This Year — and 1 I Sold

I bought and sold Suncor Energy (TSX:SU)(NYSE:SU) stock this year. There is one other energy stock I bought and held.

Read more »

Solar panels and windmills
Energy Stocks

This Stock Has Delivered a Gain of 85.3% Over 3 Years – Should You Buy It?

A dividend aristocrat that delivered massive gains in the last 3 years is a strong buy for its exceptional financial…

Read more »

protect, safe, trust
Investing

2 Defensive Stocks to Ride a Market Downturn

Hydro One (TSX:H) and Fairfax Financial Holdings (TSX:FFH) are terrific defensive stocks to buy as a recession nears.

Read more »

Wireless technology
Dividend Stocks

5 Things to Know About Telus (TSX:T) Stock

Telus offers a diversified business model and steady dividend growth. Is it a buy in this market?

Read more »

A close up image of Canadian $20 Dollar bills
Energy Stocks

3 Top TSX Stocks to Buy for Monthly Passive Income

Here are three of the best TSX dividend stocks Canadian investors can buy right now to earn reliable monthly passive…

Read more »