The Undervalued TSX Giants That Smart Investors Are Loading Up on

Consider adding these two undervalued TSX stocks to your self-directed investment portfolio before they soar.

| More on:
Target. Stand out from the crowd

Image source: Getty Images

Volatile market conditions tend to scare most stock market investors, especially beginners. When economic uncertainty grows, many investors begin selling shares in the stock market to protect their capital from devaluation. While downturns lead to warranted downward corrections for overvalued stocks, it also leads to many high-quality stocks trading for discounted valuations.

As of this writing, the S&P/TSX Composite Index is down by 1.21% from its January 31st level. Increasing uncertainty in the market seems to have prompted a selloff in some market segments after a relatively strong start to 2023. While a selloff prompts most investors to stay away from the market, it opens up opportunities for smarter investors to load up on high-quality stocks trading for discounts.

Today, I will discuss two undervalued stocks on the TSX that you can consider adding to your portfolio for this purpose.

Nutrien

Nutrien (TSX:NTR) can be a terrific investment to consider if you seek beaten-down giants on the TSX with potential to deliver substantial returns. The $52.41 billion market capitalization company based in Saskatoon, Saskatchewan, is the largest potash producer and third-largest nitrogen fertilizer producer worldwide.

With over 2,000 retail locations across North America, South America, and Australia, Nutrien stock soared rapidly last year. The sanctions on Russia resulting from its war with Ukraine prompted several markets to instead rely on Nutrien for potash, a major produce from Russia.

As of this writing, Nutrien stock trades for $100.70 per share, down by almost 32% from its 52-week high. The company’s management boasts that its world-class integrated network is the best in the industry, enabling the agriculture giant to optimize its operating, transportation, and logistics costs.

Yet its leading position did not protect it from the selloff. Market analysts forecasts that its share prices can climb by over 25% in one year. It might be the best time to load up its shares right now.

Canadian Pacific Railway

Canadian Pacific Railway (TSX:CP) is not a stock that looks like much of an attractive deal on the surface. As of this writing, CP Railway stock trades for $104.58 per share.

Down by just 6.14% from its 52-week high, it does not seem to be doing as poorly on the stock market as many others. Additionally, it trades for 23.42 times earnings, which does not make it very cheap. However, seasoned investors might see it more of an attractive bet at current levels.

Since it acquired Kansas City Southern, CP Railway stock has established a strong foothold across the border, effectively allowing the company’s railway network to expand and “unite a continent” this year.

The company boasted strong results for its fourth quarter in fiscal 2022, despite poor weather performance in the quarter. By expanding its network, the transnational railway has opened up opportunities for substantial long-term growth. It can be an excellent investment to consider at current levels.

Foolish takeaway

When you see the value of your investments go down during downturns, it can be disconcerting. However, it is essential to remember that stock market investing is not a 100-metre sprint. Rather, it’s a marathon in which you must keep steady. The market will not always go up. It will have its ups and downs, with periods when it cannot stop fluctuating.

Long-term success as a stock market investor demands placing well-thought-out bets on companies most likely to deliver substantial total returns over a few decades. To this end, Nutrien stock and CP Railway stock may be excellent investments to consider at current levels.

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 Canadian Pacific Railway and Nutrien. The Motley Fool has a disclosure policy.

More on Dividend Stocks

young woman celebrating a victory while working with mobile phone in the office
Dividend Stocks

3 CRA Benefits Most Canadians Can Grab in 2024

You can save on taxes by claiming the dividend tax credit on Fortis Inc (TSX:FTS) shares.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »