Canadian Stocks to Buy: 3 Sectors Offering the Best Value

There are tonnes of deals to find on the market today, but these three sectors have some of the best Canadian stocks to buy now.

| More on:
Dollar symbol and Canadian flag on keyboard

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

With so many Canadian stocks selling off lately, many investors are using the opportunity to add to their portfolios while there is so much value to find. Several of the best Canadian stocks are trading the cheapest they’ve been in years, making now the time to buy.

Because nearly the entire market has been selling off, though, you may be wondering where to find the most value. So, here are three of the best sectors to find the top Canadian stocks that are worth a buy today.

Tech stocks are some of the best investments for Canadian investors to buy now

There’s no question that if you’re looking for value and want to buy some of the best Canadian stocks while they trade cheaply, tech stocks are some of the best to focus on.

Many tech stocks started selling off in late 2021, and that selloff has continued throughout 2022.

The reason tech stocks have sold off is that these high-growth stocks become less attractive as interest rates rise, especially due to the higher risk they typically have. Therefore, even if tech stocks continue to perform well and grow their sales and income, valuation metrics have consistently been compressed, leading many stocks to trade ultra cheap.

These valuation metrics will likely stay low for some time. However, eventually, when the market recovers and the environment is more accommodating for growth stocks, you can be sure that their valuations will increase once again. Therefore, if you’re looking to find the best Canadian stocks to buy now, tech is one of the first sectors I’d focus on.

There are some incredible deals in real estate for long-term investors

In addition to tech, another industry that’s been severely impacted by rapidly rising interest rates is real estate. Many real estate stocks have a tonne of debt, which they use to acquire properties. When interest rates increase, though, it could now weigh on their ability to grow in the near term. Furthermore, in some cases, it can even begin to hurt margins. That’s not all, though.

Residential real estate stocks have also been selling off significantly, as many analysts warn that housing prices could fall, which would impact the entire residential market.

So, with many real estate stocks selling off, they are certainly some of the best stocks for Canadian investors to buy now. If you can find a high-quality real estate fund that you’re happy to own for the long haul, buying today at a discount is an incredible opportunity.

Therefore, if you’re looking for value and stocks that can provide attractive yields and, in many cases, consistently growing yields, then real estate is a sector I’d be focused on.

Consumer discretionary stocks have come under pressure this year

Lastly, another industry where you can find some of the best Canadian stocks to buy is consumer discretionary. With inflation impacting Canadians’ budgets, typically that means a slowdown in consumption of non-essentials or discretionary items.

Therefore, it’s no surprise to see several consumer discretionary stocks selling off, including some of the highest-quality businesses in Canada.

For example, a stock like Aritzia (TSX:ATZ) has been an impressive growth stock for years. And despite its last two earnings reports showing it continues to perform well, the stock has sold off by roughly 35% from its high.

Investors are concerned that Aritzia could be temporarily impacted by a slowdown in discretionary spending by Canadians. However, even if that were to be the case, the impacts would only be temporary. Furthermore, a roughly 35% discount for Aritzia shares is an incredible deal.

In fact, right now, the stock’s average target price from analysts is roughly $60 — a more than 60% premium to today’s trading price.

Therefore, if you’re looking for the best Canadian stocks to buy now, Aritzia, and other high-quality consumer discretionary stocks, trading at a discount will be some of the top investments to consider.

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 Daniel Da Costa has positions in ARITZIA INC. The Motley Fool recommends ARITZIA INC.

More on Investing

Stocks for Beginners

Investing Strategies for Canadians in an Uncertain Economy

These are uncertain times, as the economy grapples with high inflation. Here are four investing strategies for the current market.

Read more »

Tech Stocks

These 3 Cheap Stocks Would Be an Excellent Addition to Your Portfolio

Given their attractive valuation and solid growth potential, these three stocks would be an excellent addition to your portfolio.

Read more »

money cash dividends
Dividend Stocks

TFSA Passive Income: 2 Top TSX Dividend Stocks to Buy on the Correction

These top dividend stocks look cheap to buy right now for a TFSA focused on passive income.

Read more »

Stocks for Beginners

How to Start Investing in a TFSA in a Down Market

Are you interested in starting a TFSA during a down market? Here are a few tips to keep in mind.

Read more »

Gold bullion on a chart
Metals and Mining Stocks

Is Barrick Gold Stock a Hedge Against Inflation?

Barrick Gold is among the largest gold mining companies globally. Is the stock a good bet amid rising inflation rates…

Read more »

Make a choice, path to success, sign
Stocks for Beginners

TFSA Investors: Must-Have Stock Strategies for Your Retirement

While reliable income stocks could help TFSA investors reduce their risk profile, high-growth stocks have the potential to significantly multiply…

Read more »

Happy diverse people together in the park
Stocks for Beginners

3 Stocks New Investors Should Buy Today

The stock market has been hard to gauge for the past year or so. Which stocks should new investors be…

Read more »

Growing plant shoots on coins
Tech Stocks

Market Correction: Don’t Miss These TSX Growth Stocks

Long-term investors shouldn’t miss this correction to accumulate top TSX growth stocks at prices well below their highs.

Read more »