A stock market selloff on the TSX Index is frightening to even the most seasoned investors. If you are new to investing, don’t worry if you feel a little anxious when stocks sell off.
Stock market declines are natural, normal, and important. Stock markets are just that: markets. They overshoot valuations; then they undershoot. It is never a smooth curve up. The good news is that stocks go higher more often and for longer periods than they go down. Consequently, if you can think long term, the odds of success are in your favour.
Buying a TSX stock selloff is a great way to maximize long-term returns
That is why buying in a market correction is a great opportunity. Stocks become cheap quickly. So, when the market recovers, you get a head start on enjoying outsized returns. It takes grit to buy when the market is down. However, if you buy quality companies, you have a good chance of succeeding. If I were new to investing and looking to build a starter portfolio, here are three stocks I’d be buying now.
A top TSX financial stock
One of the first TSX stocks I would buy today is Brookfield Asset Management (TSX:BAM.A)(NYSE: BAM). Owning this stock is like owning a broadly diversified portfolio in and of itself. With $688 billion of assets under management (AUM), it is one of the world’s largest managers of alternative assets. These assets include real estate, infrastructure, renewables, private equity, specialized debt, and insurance.
BAM has been growing AUM by about 25% a year for the past five years. That has translated into annual compounded distributable earnings growth of 29% a year. Still, BAM trades at a material discount to its peers. Fortunately, management is working to find ways to unlock long-term shareholder value. This TSX stock is down nearly 8% over the past few days and looks attractive today.
A solid dividend stock
In a time where the stock market is volatile, it is never a bad idea having some exposure to TSX dividend stocks. Pembina Pipeline (TSX: PPL)(NYSE: PBA) offers one of the highest dividend yields in Canada. It pays a $0.21 dividend every month. That translates to a 6% yield today. Pembina is a great way to get exposure to strong energy markets, but without significant commodity volatility risk.
Pembina operates a diversified portfolio of pipelines, midstream assets, and energy infrastructure services. It is a crucial component in western Canadian oil production and transportation. Over 90% of its assets are on long-term contracts, so its cash flows and dividends are well protected. For a stable dividend and some decent upside from a strong energy environment, Pembina is a great TSX stock to hold.
A quality tech stock
If you are looking for technology stocks, there are plenty to choose at more attractive valuations today. TELUS International (TSX: TIXT)(NYSE: TIXT) has been on a swift decline over the past few months. Its stock is down 30.7% in this year alone.
While that is not the best sign, the business has delivered very strong results. In 2021, it grew revenues, adjusted net income, and adjusted EBITDA by 39%, 67%, and 38%, respectively. This was at the high-end of its initial 2021 outlook.
While growth is expected to slow in 2022, it is still expecting revenues and EBITDA to increase by the mid- to high teens. Any unforeseen acquisition could accelerate this. This TSX stock only trades with an enterprise value-to-EBITDA ratio of 12 and a price-to-earnings of 20. If it can exceed its growth targets, there is likely solid upside later in 2022.
