3 Cheap Stocks I’d Buy Before the Market Erupts

Here are three cheap stocks that are well positioned to reward investors in the months ahead.

| More on:

The S&P/TSX Composite Index fell 29 points on Wednesday, January 25. Industrials and energy were the worst-performing sectors on the day. Meanwhile, information technology and base metals sectors finished the day in the black. Today, I want to target three cheap stocks that are well positioned to reward investors in the months ahead. Let’s jump in.

Here’s a dirt-cheap energy stock I’m looking to snatch up before February

Vermilion Energy (TSX:VET) is a Calgary-based company that is engaged in the acquisition, exploration, development, and production of petroleum and natural gas in North America, Europe, and Australia. Shares of this cheap stock have climbed 4.3% year over year as of close on January 25. However, the stock has dipped 2.7% so far in the new year.

Investors can expect to see this company’s fourth-quarter and full-year fiscal 2022 earnings in early March 2023. Vermilion released its third-quarter FY2022 results on November 9. It reported funds flow from operations (FFO) of $508 million, or $3.10 per basic share — up 12% from the second quarter of fiscal 2022. Meanwhile, Vermilion posted net earnings of $917 million, or $5.61 per share, in the first three quarters of FY2022 — up from $804 million, or $5.00 per basic share, for the year-to-date period in the previous year.

Shares of this cheap stock possess a very favourable price-to-earnings (P/E) ratio of 2.7. That puts Vermilion in much better value territory compared to its industry peers. Meanwhile, it offers a quarterly dividend of $0.08 per share. That represents a modest 1.5% yield.

Don’t sleep on this undervalued bank stock right now

Canadian Imperial Bank of Commerce (TSX:CM) is the second cheap stock I’d look to snatch up in late January 2023. CIBC is the fifth largest of the Big Six Canadian bank stocks. That should not dissuade investors from snatching up this stock today. Its shares have plunged 27% year over year. However, the bank stock has jumped 5.4% so far in 2023.

This bank is set to unveil its first batch of fiscal 2023 earnings in late February. In fiscal 2022, CIBC’s earnings were a mixed bag in the face of major challenges. The bank’s Canadian Commercial Banking and Wealth Management segment posted adjusted net income growth of 14% to $1.89 billion for the full year. Meanwhile, adjusted net income in Canadian Personal and Business Banking dipped 4% to $2.39 billion.

CIBC stock last had an attractive P/E ratio of 8.7. This bank stock currently offers a quarterly distribution of $0.85 per share, which represents a very strong 5.8% yield.

One more energy stock that looks cheap in this uncertain market

Tourmaline Oil (TSX:TOU) is the third and final cheap stock I’d look to snatch up in the final trading days of January. This Calgary-based company acquires, explores for, develops, and produces oil and natural gas properties in the Western Canadian Sedimentary Basin. Shares of this cheap stock have soared 45% over the past year. However, the stock has dropped 1.2% in the new year.

Investors can expect to see Tourmaline’s final batch of fiscal 2022 earnings in early March 2023. In the third quarter of 2022, the company delivered before-tax cash flow of $1.05 billion — up 38% from the third quarter of fiscal 2021. Meanwhile, it posted free cash flow of $568 million, or $1.65 per diluted share.

Shares of this cheap stock possess a very attractive P/E ratio of 3.8. It increased its quarterly base dividend to $0.25 per share, representing a 1.5% yield.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends Vermilion Energy. The Motley Fool has a disclosure policy.

More on Investing

dividends can compound over time
Bank Stocks

Is National Bank of Canada Stock a Buy Now?

National Bank of Canada stock should continue to compound investors' returns post CWB acquisition

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

Cash Kings: 3 TSX Stocks That Pay Monthly

These TSX stocks pay monthly dividend and offer high yield near current market price, making them top investments for passive…

Read more »

Dividend Stocks

An 8.1% Dividend Stock Paying Cash Every Single Month

This dividend stock is a strong option not just for income in general, but also for paying out every month!

Read more »

stocks climbing green bull market
Dividend Stocks

2 TSX Stocks to Hold for Steady Gains

These TSX stocks are backed by a defensive business model and consistently deliver above-average returns for their shareholders.

Read more »

woman looks at iPhone
Retirement

How I’d Allocate $50,000 in Retirement Stocks in Today’s Market 

Here's how to invest in today’s stock market, presenting both opportunities to grow a retirement portfolio and risks of depleting…

Read more »

Investing

Can Air Canada Stock Finally Recover in 2025?

Down over 60% from all-time highs, Air Canada stock is expected to underperform in the near-term. However the TSX stock…

Read more »

space ship model takes off
Tech Stocks

1 Canadian Stock That Could Be the Best Investment This Decade

This tech stock might not seem like the most obvious buy, but trust me, it certainly should be.

Read more »

dividend growth for passive income
Dividend Stocks

5 Canadian Dividend Stocks With Years of Secure Payouts Ahead

These Canadian dividend stocks have visibility over future payouts, implying investors can rely on them for steady passive income.

Read more »