The Canadian stock market struggled through most of 2022. While 2023 began with a more positive momentum, the last few weeks have seen the S&P/TSX Composite Index slightly dip. As of this writing, the Canadian benchmark index is down by 1.21% from its January 31st level. While not a steep decline, it indicates a selloff in the market.
Beginner investors might worry about investing right now. However, the more seasoned investors with a long investment horizon might view it as an excellent opportunity. As TSX stocks sell off, many assets correct downward to more reasonable levels. However, the broader impact of the panic also means the valuation of several high-quality stocks decline.
Downturns are a part of stock market investing. Using them as opportunities to capitalize on discounted stocks for wealth growth through capital gains is something savvier investors do. Identifying high-quality undervalued stocks is the key to pulling it off.
Today, I will discuss three TSX stocks you can consider for this purpose.
As one of Canada’s Big Six banks, Toronto-Dominion Bank (TSX:TD) is not a stock you might typically find as an undervalued bet. However, bank stocks typically feel the full force of pullbacks.
Despite declining valuations during volatile markets, the long-term price performance of bank stocks show that these are mere bumps on the road to greater growth. Recessionary periods see provisions for credit losses and other issues rise, causing bank stock earnings to take a hit.
TD Bank has seen its fair share of recessions, coming out stronger on the other side without suspending or slashing its shareholder dividends. TD Bank stock put its liquidity to good use, acquiring First Horizon Bank and Cowen at reasonable prices.
With these acquisitions, the bank has opened the doors for stellar long-term growth. As of this writing, TD Bank stock trades for $92.87 per share, boasting a 4.13% dividend yield.
Aritzia (TSX:ATZ) is a $5.12 billion market capitalization Canadian women’s fashion brand founded in Vancouver. The company sells a variety of lifestyle apparel through various upscale retail stores throughout Canada and the U.S.
Forced by the pandemic, Aritzia also focused on expanding its e-commerce segment. Aritzia’s business has been growing rapidly for several years. However, its expansion across the border and impressive e-commerce platform have more than doubled its sales in the last six quarters.
When the economic environment becomes uncertain, people tend to cut down on discretionary expenses. Since it sells discretionary goods, ATZ stock has not been spared from the selloff.
Despite the decline, it can be an excellent asset to buy at current levels. When the economy stabilizes and sales volumes increase again, it can deliver strong wealth growth through capital gains. As of this writing, ATZ stock trades for $44.77 per share, down by almost 20% from its 52-week high.
Granite REIT (TSX:GRT.UN) is a real estate investment trust (REIT) was on a decline for several months before its share prices started gaining traction in October 2022. After another rise and decline before year’s end, it had a strong rally in the first few weeks of 2023. As of this writing, its rally stalled. Granite REIT trades for $85.27 per share, up by 22.18% year to date but down by over 15% from its 52-week high.
Granite is a rock-solid REIT to consider. A reliable real estate stock that pays its investors on a monthly schedule, Granite REIT also boasts long-term growth potential.
The $5.45 billion market capitalization trust primarily engages in acquiring, developing, owning, and managing industrial, warehouse, and logistics properties throughout North America and Europe.
The demand for industrial and warehouse properties outpaces supply, allowing Granite REIT to achieve at least 10% year-over-year revenue growth for 12 consecutive quarters.
With an impressive pipeline of growth opportunities, it can be an excellent investment at current levels for passive income and long-term capital gains.
Identifying high-quality stocks trading for lower than intrinsic values is an excellent strategy to be successful as a stock market investor. Granite REIT, ATZ stock, and TD Bank stock can be ideal investments for this purpose.