The month of February brought the worst fears to reality. The world is in one of the biggest conflicts since World War II, and it is impacting the economy of all nations indirectly. As the war escalates, Bloomberg Economics did a scenario analysis on the possible economic impact. In the best-case scenario, the war ends, energy prices rise, but the global economy thrives. In the worst-case scenario, inflation accelerates to unprecedented levels in March, there is an energy shortage, and economies plunge into recession.
Three TSX stocks to buy in March 2022
The war has created global economic uncertainty, thereby impacting stock markets. Stocks that rely on economic growth took a plunge. In 2014, when the Russia-Ukraine conflict began, Warren Buffett warned against hoarding cash as money loses value in a war. Instead, it is a time to buy stocks that you believe can earn more money five to 20 years later.
This got me thinking about stocks with good fundamentals and the ability to earn more money in the years to come. Here are three Canadian stocks that I shortlisted:
- Descartes Systems (TSX: DSG)(NASDAQ: DSGX)
- Magna International (TSX: MG)(NYSE: MGA)
- Dye & Durham (TSX: DND)
Descartes Systems
The war has disrupted global trade and the supply chain. Some of the international routes are not safe. First, it was the pandemic, and now it is the war. Once again, the world is facing tough times, and Descartes Systems’s stock took a plunge. The stocks have plunged 21% from their November 2021 high.
But Descartes has risen from the deepest of the crisis (except the dot.com bubble). The company provides supply chain management and logistics solutions through air, road, rail, and sea. Its exposure to diverse verticals keeps the risk low. It also enjoys strong cash flows and steady adjusted EBITDA.
Once the war subsides, there will be pent-up demand for industrial goods. The war could set up a whole new trade system. How? The U.S., Europe, and Canada imposed sanctions on Russia. This could require many countries to look for alternative suppliers. Descartes is well-placed to help companies restructure their supply chains. The stock surged a whopping 80% after the pandemic crash. It could surge significantly during the war recovery, making it a good purchase for March.
Dye & Durham stock
Another tech stock that enjoys strong cash flows is Dye & Durham, which provides financial and legal professionals solutions to improve efficiency and increase productivity. It’s fiscal 2022 second-quarter revenue and adjusted EBITDA surged 225% and 267%, respectively. This growth comes from the acquisitions it made last year.
DND acquired TELUS’ Financial Solutions Business for $500 million in December. It is in the process of acquiring Australia’s Link Group for $3.2 billion and expects to complete it by the third quarter. The Link acquisition could significantly increase DND’s earnings next year. However, the tech sector meltdown from rising inflation and the war has pulled DND stock down 36% from its December high. This is a good time to buy this growth stock at a cheap price.
Magna stock
Unlike Descartes and DND, Magna is a long shot. Magna manufactures automotive components and is a key beneficiary in the electric vehicle (EV) wave. Europe, China, and the U.S. are its key markets, however, the war has affected them. The rising oil prices and inflation might shift consumers’ purchases away from discretionary products like automotive toward energy.
Rising natural gas prices could encourage the adoption of EVs, provided EV charging stations use renewable energy. The fundamentals are bleak for Magna at present. Its revenue and EPS fell 11% and 54%, respectively, in the quarter ended December 2021 due to chip supply shortage and rising commodity prices. The war could delay the recovery further. But Magna has sufficient cash reserves to withstand the crisis.
Magna stock survived the 2009 financial crisis, the pandemic, and the chip shortage. It can survive the war. The current dip is an opportunity to book your seat in the EV wave at a cheaper price.
