Load Up Your TFSA With These 3 Beaten-Down Stocks

Undervalued and discounted stocks might present investors with unique opportunities but might also reveal underlying problems in the companies or sectors.

| More on:
TFSA and coins

Image source: Getty Images

The TSX has fallen over 16% in the last few months, and with a recession on the horizon, the market (as a whole) might not go properly bullish for a while. You might already be experiencing the impact of this decline in your portfolio’s value. It’s tough to hold on to rapidly declining stocks, but dumping years of growth in a weak market is not a smart thing to do.

Even when the market fully recovers, your portfolio may take some time to reach its peak value. And even then, there will be some financial scars (losses). The best way to make up for those losses is to take advantage of the current discounts and add some potentially powerful beaten-down securities to your portfolio.

A REIT

If you are looking for a decent combination of growth potential and dividends, Granite REIT (TSX:GRT.UN) is a compelling option. Before the real estate slump, which has been harder than the broader TSX slump, pushed the stock down 29%, it was one of the best growth stocks among the REITs. Thanks to the discount, the stock is offering an attractive 4.15% yield.

It’s one of the few aristocrats in the real estate sector and is currently offering dividends at a brutally safe payout ratio of 12.7%, making its dividend quite safe. The discount is also augmented by undervaluation, as the stock is currently trading for a payout ratio of just 3.12.

Since it’s a commercial REIT with an e-commerce-focused, international portfolio of light industrial properties, it’s unlikely to go down with the housing market (in the long run).

A tech stock

Coveo Solutions (TSX:CVO) can be considered an unfortunate stock. It listed and started trading on the TSX in Nov. 2021, when the tech sector correction (which is still underway) was in full swing. As a result, the stock has declined by over 67% in market value.

Another thing that’s weighing down the company is its association with e-commerce. The company offers AI-driven personalization solutions to e-commerce businesses across multiple domains.  

The stock might be up for a strong bullish phase when the market finally turns. Since it’s a tech stock, the sector’s recovery will likely become the trigger that takes the company up. But it’s also a fundamentally strong pick, thanks to its financials which are going up just as steadily as the stock has gone down. And as a result, the stock is quite aggressively undervalued, with a price-to-earnings ratio of just one.

A financial stock

CI Financial (TSX:CIX) is an investment company that offers a wide range of financial products and services to its customers. It operates through five divisions, including wealth management, asset management, and direct investing, all of which fall under the CI Financial umbrella. It has a global presence, but most of its reach is concentrated in North America.

The stock is currently both discounted and undervalued. At a price-to-earnings ratio of just 6.28, the undervaluation is quite modest. But the 53% discount from its last peak and a 45% slump from its pre-pandemic peak is quite extreme. Thanks to the undervaluation, the discount doesn’t seem too dangerous, and if you buy and stash it in your TFSA now, you can also look at the impressive 5.1% yield.

Foolish takeaway

These beaten-down stocks would do just as well in your RRSP as they would in your TFSA, so a typical TFSA vs. RRSP debate isn’t warranted. However, since they are beaten-down stocks ready to explode when the market becomes bullish again, they can offer decent returns in the short term. And if you can realize the gains offered by these stocks, you will have more capital to work with in your TFSA.  

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 recommends GRANITE REAL ESTATE INVESTMENT TRUST.

More on Dividend Stocks

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

This 8% Dividend Stock Pays Cash Every Month

Earn monthly cash of $154 with this 8% dividend stock.

Read more »

oil tank at night
Dividend Stocks

Think Oil Is Going Higher? 3 Dividend Stocks to Buy Now

Looking for steady dividend growth? These three Canadian oil stocks could provide substantial dividend income in the coming years.

Read more »

Profit dial turned up to maximum
Dividend Stocks

This 7% Dividend Stock on the TSX is Worth Watching

With this superb TSX stock now trading at the bottom of its 52-week range, it's certainly a dividend stock you'll…

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

2 TSX Dividend Stocks to Buy While They Still Offer Great Yields

These top dividend-growth stocks now offer 7% dividend yields.

Read more »

Dots over the earth connecting the world
Dividend Stocks

1 Magnificent Dividend Stock Down 23% to Buy Right Now Near a Once-in-a-Decade Valuation

Patient investors could be happy with this dividend stock a few years down the road.

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Best Stocks to Buy in May 2024: TSX Real Estate Sector

Besides yielding stable monthly passive income, these top TSX real estate stocks could help you earn high returns on your…

Read more »

exchange-traded funds
Dividend Stocks

These 2 Dividend ETFs Are a Retiree’s Best Friend

Retirees looking for steady income will love these two Canadian dividend ETFs

Read more »

Bad apple with good apples
Dividend Stocks

Safe and Sound Stocks for Canadians: My Top 5 Choices

Want some of the best stocks for Canadians right now? Here's my top 5 list of stocks to buy today…

Read more »