The ongoing stock market volatility has provided investors a chance to invest in quality stocks trading at a discount. Yes, there is a chance for indices to move lower due to a challenging macro environment. But as it’s impossible to time the market bottom, every major dip should be viewed as a buying opportunity.
So, if you have $1,000 right now, you can consider buying these three beaten-down TSX stocks in September.
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Bank of Montreal
One of the largest banks in Canada, Bank of Montreal (TSX: BMO)(NYSE: BMO) is valued at a market cap of $82 billion. BMO stock is currently down 19% from all-time highs, increasing its forward yield to a tasty 4.6%.
Canadian bank stocks are quite conservative compared to their counterparts south of the border. But this has allowed BMO and peers to maintain their dividend payouts across economic cycles. In fact, BMO has paid investors a dividend for close to 200 years now. The company managed to pay investors a dividend during the financial crash of 2008 and even amid the ongoing pandemic.
BMO has the highest tier-one capital ratio among North American banks, indicating its strong risk profile. This ratio measures a bank’s ability to withstand economic adversity, as lending is an extremely cyclical industry.
Valued at nine times forward earnings, BMO stock is cheap. It’s also trading at a discount of 25% compared to Wall Street consensus price targets.
Barrick Gold
During periods of economic turmoil, investors increase exposure to safe-haven assets such as gold. So, it makes sense to allocate a small portion of your portfolio towards mining companies such as Barrick Gold (TSX: ABX)(NYSE: GOLD).
Gold prices have been trending downwards in the last two years, dragging shares of Barrick Gold lower by almost 50% since mid-2020. There is a strong correlation between gold prices and the companies that mine this commodity.
Further, due to rising costs and inflation, analysts expect Barrick Gold’s adjusted earnings to fall to $1.31 per share in 2022 from $1.46 per share in 2021. But the stock is extremely cheap given its price-to-forward-earnings multiple of 15.
Barrick Gold stock is also trading at a discount of 50% compared to average price target estimates.
Suncor Energy
Rising oil prices have driven Suncor Energy (TSX: SU)(NYSE: SU) stock higher by 86% in the last year. But due to recession fears and lockdowns in China, Suncor stock is also down 20% from 52-week highs. Despite the recent pullback, Suncor offers investors a dividend yield of 4.6% right now.
One of the cheapest stocks on the TSX, Suncor is valued at 4.5 times forward sales, which is lower than its historical average, Further, its long-life, low-decline asset base allows Suncor to easily cover operating expenses, capital expenditures, and dividends due to elevated oil prices.
In the second quarter of 2022, Suncor reported net earnings of $4 billion compared to $868 million in the year-ago period. In the first six months of 2022, its earnings stood at almost $7 billion compared to $1.69 billion in the same period last year.
Suncor will break if WTI oil trades over US$35/barrel. So, even if the economy enters a recession, the energy heavyweight will be able to sustain dividend payouts in the near term.
