These are difficult times as liquidity and affordability are drying up. Addressing the high inflation, the Canada Revenue Agency has increased the 2023 Tax-Free Savings Account (TFSA) limit to $6,500. But don’t use up all your limits, as the coming bear market will present more value opportunities in mid-2023. But right now, three TSX stocks can grow your $3,000 significantly when the economy recovers later this year.
Three TSX stocks to buy with $3,000
As Warren Buffett says, “be fearful when others are greedy and greedy when others are fearful.” The 2022 tech selloff and the 2023 market dip from the U.S. banking crisis have made investors fearful of high-risk technology stocks. The rising inflation interest rate is reducing the purchasing power of consumers, making investors fear auto-related stocks.
It is time to go contrarian on these stocks, as they have a strong recovery rally. Here are three stocks to buy with $3,000 TFSA money.
BlackBerry
BlackBerry (TSX:BB) stock lost 63% value in the 2022 tech stock selloff. This selloff was also because of the company’s weak earnings. Its cybersecurity revenue has been declining throughout 2022, as governments delayed the signing of contracts. And the automotive revenue was stagnant, as delays in car production due to supply chain shortages pushed BlackBerry’s QNX royalty revenue. However, the company kept the design win momentum going, helping it secure revenue for its product designs.
BlackBerry has three growth triggers — one which materialized on March 20. The company sold its non-core patents to Malikie Innovations for $900 million ($200 million in cash and $700 million in royalties on profits). The other two triggers are the recovery in automotive production that could unlock $560 million of unrealized royalty revenue and the signing of pending cybersecurity deals.
A looming recession in mid-2023 could keep revenues and earnings low in the short term. But BlackBerry’s $500 million cash reserve and no debt give it the financial flexibility to fund its losses and research and development. The stock is a buy while it still trades below $6, as it could return to its $8 average trading price, as the other two triggers unlock.
Magna stock
Magna International (TSX:MG) stock fell almost 20% after the company reported slightly weak 2022 earnings but gave strong guidance of a 6.8% average revenue-growth rate in the next three years. The auto component supplier is hit by the many challenges of electric vehicle (EV) adoption.
First, the pandemic, then the semiconductor shortage, then the energy crisis, and when these supply issues were resolved, the inflation and high-interest rate pushed EV demand to a future date. In China, EV adoption was the fastest and EV maker BYD reported a 400% jump in net income on record EV sales.
China’s growth could be replicated in all major auto markets where Magna has a presence. Warren Buffett purchased BYD shares when it was not trending. You can buy Magna shares now and sell them when the stock crosses its 2021 peak of over $110. It surged at this level as demand recovered and before the supply shortages began. Magna expects to see growth in the second half of the year, as the economy recovers.
Don’t wait for the second half of the year to buy the stock. Buy now when everyone is selling. You could pocket a 40-50% profit when EV momentum revives.
Dye and Durham
Dye and Durham (TSX:DND) is another tech stock that could unlock value once it sells its TM Group U.K. to comply with the competition regulator. The work efficiency software grows through acquisition. It has had several successful acquisitions in its lifetime. But as the size of acquisitions increased, so did the complications.
DND’s long-pending acquisition of Australia’s Link Group was pulling down the former’s stock price as delays added to the cost. DND stock jumped 55% after it terminated this problematic acquisition in December 2022. The TM Group U.K. acquisition has become problematic. It is dragging DND’s stock price. Once DND sells TM Group U.K., it will release funds for further accretive acquisitions.
Investing tip
Don’t buy stocks when everything is rosy. Instead, buy them when dark clouds stall growth for the short term.
