The Canadian dollar can’t seem to catch a break these days, with the loonie going for around US$0.73 at the time of writing. The greenback may or may not weaken from here. Ultimately, it depends on what the Federal Reserve ends up signaling next. Either way, the loonie is in a huge rut, with no easy way out.
Banking sector volatility and the Bank of Canada pause could mean the loonie will remain under pressure over the near term, as the Fed keeps at it with its inflation- and tech stock-crushing rate hikes. However, if the Fed pulls the brakes to avoid breaking anything else in the banking scene, the loonie could get a bit of relief.
Canadian stocks to go loonie for
In any case, Canadian investors shouldn’t feel the need to get dinged by exchanging Canadian dollars for greenbacks. There are a lot of great, cheap stocks on this side of the border and in this piece, we’ll look at two that I’d be willing to check out while they’re down and out.
As recession nears, I think it’s only prudent to insist on cheaper multiples. That way, you’ll take on less risk when harm comes your portfolio’s way.
Nutrien stock
Nutrien (TSX:NTR) is a fertilizer company that’s been roaring since bottoming in 2020. The stock more than tripled (250% gains or so) from trough to peak before pulling back around 30%.
Today, shares have encountered an ugly bear. Shares are down more than 27%, with a juicy 2.83% dividend yield. Indeed, the yield is starting to look bountiful again. If the bear continues to claw at shares, I’d look for the 3% yield mark as a potential entry point.
Though Nutrien stock has been a turbulent ride in recent months, I think there’s significant value to be had for those willing to wait it out. As a top producer of potash, with some of the best mining assets and costs of production in the world, Nutrien is a wonderful company to own for the long haul.
In a prior piece, I’d outlined the long-term secular tailwind in the rising global population that will help keep fertilizer in high demand in the distant future. The nearer term is less clear, as the Ukraine-Russia war continues.
Regardless, I think there’s a lot of value to be had in Nutrien right here, as it continues to make solid profits. These profits will go right back into shareholders’ pockets, as the firm looks to keep raising its dividend year after year.
Finally, the weak loonie is a slight tailwind for Nutrien, given the firm does a lot of business outside Canada.
CN Rail stock
CN Rail (TSX:CNR) is a railway giant that also does a lot of business for non-Canadian clients. With the loonie as weak as it is right now, transacting in foreign currencies (like the U.S. dollar) is a good thing. Aside from foreign exchange tailwinds, CN Rail also stands to benefit from previous investments to beef up its operating ratio. Indeed, CN Rail still has room to improve efficiencies. And while a recession could derail (forgive the pun) a few catalysts, I think the company will be on solid footing once the Canadian recession finally does end.
In short, CN Rail is a wide-moat company to consider whenever it sags by a considerable amount. Even with shares under a bit of pressure, I view CN Rail as a rail play on the road to riches. The 2% dividend yield is modest, but it’s subject to impressive growth over time, even with the odd recession considered.
