In this inflationary environment, the one thing available for cheap is growth stocks. Rising inflation forced the central banks worldwide to increase interest rates. Interest rates and stock prices share an inverse relation. Higher interest rates help investors earn a higher return on low-risk debt securities. This encourages investors to book profit on high-risk equity and put it in bank deposits.
Tech stocks saw a selloff in January, as hedge funds booked profits ahead of interest rate hikes. But this market correction turned into a downturn, as rate hikes failed to control inflation. Economists warned of stagflation and looming recession. The panic opened up opportunities to buy good value stocks that could become multi-baggers 10 years from now.
Three cheap Canadian stocks under $10
Here are three stocks I am bullish on for their long-term secular growth trend.
True North Commercial REIT
Real estate is not something that can go out of business. Land is limited, and habitable land is even more limited. REITs are buying and developing habitable land to make it more useful. REITs have made real estate more efficient and affordable to investors.
True North Commercial REIT (TSX: TNT.UN) is relatively new in this space. Founded in 2012, this commercial REIT has 46 properties across five Canadian provinces. It generates regular income from these properties by leasing them to tenants with high creditworthiness, including government offices.
The company is still broadening its portfolio. It paused new acquisitions in 2020, as it withstood the pandemic crisis without a distribution cut. It can also survive the recession and increase its stock price as the economy recovers. In the meantime, you can enjoy a distribution yield of 9.35%.
BlackBerry stock
BlackBerry’s (TSX: BB)(NYSE: BB) turnaround story is taking forever. For the past five years, you are hearing that the company is seeing success in automotive operating systems. BlackBerry technology is used in many automated driver-assistance systems (ADAS), and the order wins continue to accelerate.
But the short-term headwinds of the automotive industry keep pulling down BlackBerry stock. The company is still making losses, but it sees profitable quarters, too. Many automakers and auto component suppliers recognize BlackBerry’s technology. The growing adoption of 5G has set the ecosystem for the internet of things (IoT), where BlackBerry has a footing. It has a cybersecurity arm that generates stable and regular income, but growth is in IoT.
The market downturn has pulled BlackBerry stock down 50% from its November 2021 high. The stock enjoys high trading volume, and it has the potential to tap the future growth trend of connected cars and devices. This is an early-stage growth stock available at a cheap price at present.
Ballard Power Systems stock
What if cars could run on water? This technology is at an early stage, and it is called hydrogen fuel cells. But it is still in early stage and is undergoing testing. Imagine the growth potential once this technology comes mainstream. Ballard Power Systems (TSX: BLDP)(NASDAQ: BLDP) would be a key beneficiary. The stock is currently trading below $9. But 10 years from now, its stock could surge past $100 if its hydrogen fuel cell technology gathers momentum in bus, truck, rail, marine, off-road vehicles and stationary power market.
The testing phase is pressurizing its margins, with its first-quarter adjusted EBITDA loss widening to US$27.5 million from US$14 million a year ago. The next few years could remain the same for Ballard. But when the growth begins, it could surge at a rapid pace. If you buy at that time, you will lose the first-mover advantage.
Foolish takeaway
Cheap doesn’t always mean poor quality. Cheap also means a stock that is yet to unleash its true potential. The above three are small- and mid-cap stocks at the early stage of growth and have to face several hurdles before becoming multi-baggers. These companies have the skill and technology to become the next large-cap stocks.
