If a stock is persistently cheap on the TSX, there is generally a reason for it. However, from time to time, the market gets it wrong. As a result, shrewd investors can pick up great stocks at temporary bargain prices.
As Warren Buffett famously said, “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” Here are three stocks that long-term investors can buy at bargain prices today.
A top TSX energy stock
Tourmaline Oil (TSX: TOU) stock is down 10.7% this year. That is after a momentous 66% run up in 2022. The company has been hit due to the drastic collapse in natural gas prices this year. Given that Tourmaline is the largest natural gas producer in Canada, the selloff may appear justified.
Yet there are good reasons not to write off this stock. Firstly, the market is not recognizing that Tourmaline is still Canada’s fourth-largest conventional oil liquids producer. In fact, it has one of the fastest-growing oil portfolios among its peers.
Secondly, 32% of Tourmaline’s 2023 gas production is hedged at nearly two times the current natural gas price. In addition, Tourmaline has access to top-priced markets (like California), and it tends to earn a major price premium to strip price.
While Tourmaline is not the cheapest TSX energy stock (eight times free cash flow), it is cheap compared to the broader market. The company is a cash machine. Last year, it returned a substantial amount back to shareholders in the form of base dividends, special dividends, and share buybacks (around a 12% dividend yield).
Insiders have a huge stake in the company. They have been regularly adding this year. That is always a good buy signal, especially if you have a longer-term investment horizon.
A recreational leader around the world
Sometimes market negativity can be a great opportunity to buy a TSX stock for the long term. This could be the case with BRP (TSX: DOO). The company delivered extremely strong double-digit earnings growth in 2022. However, given the economic environment, it gave a more tepid, low-single-digit earnings outlook.
This may just be the company being conservative. It has a long record of under promising and over delivering. Regardless, the company has an incredible portfolio of high-end recreational vehicles and watercraft. It is literally creating new categories of products for the market.
Today, this TSX stock is trading for only 7.8 times earnings. For a company that has compounded returns by 15% since inception, that seems like an exceptionally fair price to pay.
A bargain U.S. real estate stock on the TSX
TSX real estate stocks have been beat-up in 2022 and 2023. One stock that looks like an attractive bargain today is BSR Real Estate Investment Trust (TSX: HOM.U).
BSR operates a portfolio of garden-style apartment communities across Texas, Oklahoma, and Arkansas. Most of these properties are located in some of the highest economic and population growth regions in the United States.
Last year, it grew adjusted funds from operation (AFFO) per unit by 35%! While growth might slow in 2023, it could still see AFFO per unit increase by the high single digits.
Today, BSR trades at a material 40% discount to its private market value. It also trades with an attractive 4% distribution yield. This discount won’t last forever, so now is the ideal time to buy this high-end, well-managed real estate portfolio.
