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.
