Buy These 3 Stocks if the 2022 Dip Follows the Pandemic Trajectory

While the recovery may not be as swift or even of the same magnitude, the current TSX fall may offer “buying the dip” opportunities akin to the 2020 crash.

| More on:
falling red arrow and lifting

Image source: Getty Images

The TSX Composite Index has fallen almost 10% in about 15 days. It’s the sharpest fall of the year, and the angle is quite close to the 2020 pandemic crash. If you missed your chance to buy discounted companies during the 2020 crash, you might consider buying now.

Note that it’s not necessary for the stocks to behave the same way. But if they do, there are at least three stocks that should be on your watchlist.

A bank stock

Canadian bank stocks have a relatively milder fall compared to most other sectors and industries, and they went through a much more pronounced growth phase than the decline. However, most bank stocks are in correction mode right now, and if a crash is coming, it can trigger a much harder fall.

So, if you buy an outstanding dividend stock, like Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), from the banking sector, you might be able to lock in a handsome yield, considering it’s already at 5.1% now and that’s when it’s trading at a 16.5% premium to its pre-pandemic peak.

The banks skipped a year of dividend growth due to regulatory requirements, but when they restarted growing their dividends, most banks made up for the gap year. CIBC was one of the banks. The dividends are safe as the payout ratios have remained below 50% over the last 10 years.

A trucking company

TFI International (TSX:TFII)(NYSE:TFII) is one of the stocks that grew far more than they fell. It dropped roughly 38% during the crash, and the subsequent growth phase pushed the stock up over 440% at its best.

It’s still trading at a 98% premium to its pre-pandemic peak, even after a 34% decline. But considering its current valuation and price-to-earnings ratio of 9.3, it seems like the stock has found its new normal baseline and that it was undervalued before.

However, if the upcoming earnings report change this number by a significant enough margin, it may contribute to accelerating the current fall and push the stock down closer to its pre-pandemic value. A full-blown market crash can do the same, and that would be an excellent opportunity to buy this stock, which may recover and grow to its 2021 peak again.

An aviation stock

Exchange Income Corporation (TSX:EIF), as an aviation stock, suffered one of the most brutal falls during the 2020 crash. The stock fell around 63.8% during the original crash. Currently, the stock is trading relatively close to the pre-pandemic peak, just about 9% down, and it has a yield of about 5.75%. So, you may be able to reach double digits or quite near it if the upcoming fall is the same as 2020 one.

And a good yield isn’t the only thing the stock offers. You can also benefit from a decent recovery-fueled growth, which, at its best, pushed the stock up over 180%. One main difference between the last crash and the current dip is that aviation businesses fell organically due to low demand and fear of the coronavirus, and the current push is simply peer pressure by comparison.

Foolish takeaway

It would be a smart idea to keep an eye on the three stocks and see how they behave if the market falls further. All three can be held long term — CIBC and Exchange Income Fund for dividends and modest growth, and TFI International for powerful growth potential. And if you can grab a substantial enough discount, it may meaningfully impact your return potential.

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 Investing

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Investing

2 No-Brainer Stocks to Buy With $5,000

These two stocks could be excellent buys amid this uncertain outlook.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Stocks for Beginners

5 Canadian Stocks to Hold in Your TFSA For Decades

The TFSA is the perfect place to compound wealth over decades. Don't pay any tax on these top five growth…

Read more »

edit Woman calculating figures next to a laptop
Dividend Stocks

Should You Invest in BCE Stock for its Dividend?

BCE stock is not yet out of the woods. But this article could change your perspective about the stock and…

Read more »

sale discount best price
Dividend Stocks

Bargain Hunting for Dividends: 3 High-Yield Stocks Haven’t Been This Cheap in Years

Enbridge (TSX:ENB) stock's key enterprise value multiple reached a new multi-year low recently. BCE remains a high-yield dividend play while…

Read more »

An airplane on a runway
Stocks for Beginners

Where Will Air Canada Stock Be in 3 Years?

Here’s why I wouldn’t be surprised if Air Canada (TSX:AC) stock more than doubles in value in the next few…

Read more »

Lady holding mobile phone and shopping bags
Tech Stocks

The Ultimate Growth Stock to Buy With $1,000 Right Now 

Here's why Shopify (TSX:SHOP) could be the ultimate growth stock long-term investors want to consider at this current point in…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Cash in Your Pocket: 3 TSX Dividend Stocks That Pay Out Monthly

Bolster your monthly income with these three dividends stocks that act like regular paycheques.

Read more »

clock time
Stocks for Beginners

Is It Too Late to Buy Dollarama Stock?

Dollarama stock (TSX:DOL) is up a whopping 48% in the last year, but growth is slowing for this great low-cost…

Read more »