There are multiple stocks on the TSX today going through a selloff. These selloff stocks offer Canadian investors with a supreme opportunity to create wealth in the years to come. But not all of them are the same.
With the TSX today down about 10% as of writing, we’re still in correction territory. Yet shares have risen by almost 5% in the last two weeks. So, the opportunities now available may soon be gone. That being said, don’t just grab what you think was good even before the fall — heck, even before the pandemic! Times have changed, and your investment strategy should, too.
Stay out of oil
Before the pandemic, and, really, over the last several decades, oil and gas stocks were some of the best companies to buy. Today, these are now selloff stocks that could be great opportunities. But I warn against these stocks.
Oil and gas companies received an incredible rise thanks to inflation — inflation that central banks are trying to tamp down. Canada hit an almost 40-year high in inflation, according to Statistics Canada, with inflation rising 8.1% year over year in June. Gas prices soared as a combination of low supply, high demand, inflation, and Russian sanctions continued to hit the sector.
But if you look back before the pandemic fall, you’ll see that oil and gas companies weren’t doing all that well. In fact, they became some of the selloff stocks that Canadians bought back in hopes of getting dividends. And granted, in the last year, these stocks have soared into the double digits! But will that remain long term?
In my view, no
Long term, energy companies provide incredible opportunity. And I’m not saying you have to get away from oil and gas completely. But even the Organization of Petroleum Exporting Countries (OPEC+) admitted that by 2040, it’s likely that low-income countries will be the main ones that are reliant on oil.
Instead, it’s time to focus on the future of energy for the future of investments. This would include everything that produces and supports that energy production. That might include the properties where these assets will be set up, or the components to create batteries to store the power.
And that’s where I’d turn my attention when looking for selloff stocks.
Three selloff stocks to consider on the TSX today
An excellent portfolio would include renewable energy assets, utility stocks, and commodities that support this new future. And for those looking for selloff stocks, I’d look to TransAlta Renewables (TSX: RNW), Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN), and Teck Resources (TSX: TECK.B)(NYSE: TECK).
TransAlta provides renewable power generation throughout Canada and Australia. It trades at just 2.4 times book value and has a 5.4% dividend yield. Shares are down 13% in the last year but have climbed 6% in the last month. So, it could be a great time to pick up the stock.
Algonquin gives you exposure to natural gas as a utility producer but also to renewable energy. It provides power no matter what goes on in the economy, and it uses revenue to expand its business. The company trades at 1.7 times book value and has a 5.44% dividend yield. Shares are down just 4% in the last year but 10% since April. However, it’s making a comeback among selloff stocks in the past few weeks.
Finally, Teck gives investors exposure to all the metals that commodities have to offer. The company produces, develops, and acquires companies that give access to everything from copper and silver for electrical components to steel-making coal. It trades at 4.58 times earnings, has a 1.43% dividend, and shares are quite down. In the last month alone, shares have dropped 18%. Even still, shares are still up 29% in the last year.
Bottom line
All three of these selloff stocks offer you passive income and soaring long-term possibilities. These stocks have been around for decades, giving you long-term income that you can count on. Furthermore, with a recovery after this market downturn, it’s a great time to pick up them up on the TSX today.
