Inflation and rising interest rates have contributed to market volatility in 2023, and some pundits see a recession looming. But behind that pullback it’s hard to deny that a new bull market is coming.
While the market may still be down, there are some viable candidates to consider for when that eventual new bull market makes its entrance. Here’s three TSX stocks to consider now.
The tech outfit that screams long-term potential
Remember Shopify (TSX: SHOP)? The one-time market darling surged when the pandemic started as consumers shifted to online sales channels to buy necessities. As the market began to reopen, that COVID bubble burst and sent Shopify’s stock dropping.
Today, Shopify sits near-flat over the trailing 12-month period, and up just over 5% since the onset of the pandemic. Interestingly, the stock paints a different story over a shorter time period. Shopify has surged approximately 40% year to date.
The increase is impressive, but does it make Shopify a stock to buy before that new bull market arrives? There’s two key points to consider.
First, let’s keep in mind that the appeal of Shopify’s business model hasn’t diminished. The shift towards mobile commerce still continues, but slower than during the pandemic. Fortunately, prospective investors should note that Shopify is a global platform with billions traversing the platform daily.
Finally, we have Shopify’s offer. The company generates its revenue primarily from its subscription-based service. The price of that service saw a bump in the last quarter, which was the largest increase in a decade.
In short, the expected growth of Shopify’s business, factored with the expected bump in service revenue, should help the stock keep growing.
Banking on growth and a juicy income
It would be hard to write about the stocks to buy in advance of the new bull market coming without mentioning at least one of Canada’s big banks. The big banks offer a stable revenue stream, serious growth potential, and a juicy dividend.
Adding to that, the banks have an established history of faring better during downturns over their U.S.-based peers. That’s a huge advantage to note when considering a new bull market is coming.
And that bank to consider buying is Bank of Montreal (TSX: BMO).
BMO is not the largest of the big banks, but it has been paying dividends longer than any other company in Canada. The current yield works out to an appetizing 4.63%.
But that’s not the only reason to consider BMO. The bank recently completed the acquisition of California-based Bank of the West. The deal brings billions in loans and deposits, along with 1.8 million new customers under BMO’s growing U.S coverage.
In fact, BMO’s U.S. presence now extends to 32 states, making it the eighth largest lender in the U.S. market.
Renewable Energy is set to grow
Renewable energy is another area to consider today knowing that a new bull market is coming. Renewable energy stocks are unique investments. They offer the reliable revenue generation potential of their fossil fuel burning peers, but without any transitional costs.
TransAlta Renewables (TSX: RNW) is a renewable energy stock to consider buying in anticipation of a new bull market. TransAlta boasts a portfolio of 48 facilities located across Canada, the U.S. and Australia. Those facilities include solar, wind, hydro and gas assets.
Thanks to rising inflation and high interest rates that have tightened the appetite for growth, TransAlta’s stock has dropped over 30% in the trailing 12-month period. That drop has also pushed the dividend yield to an incredible 7.57%.
Oh, and let’s not forget that unlike most other income stocks, TransAlta pays out that dividend on a monthly cadence.
In short, TransAlta is a great long-term option that trades at a discount, but that discount won’t last. The stock has already appreciated 10% year to date.
A new bull market is coming, but will you buy these stocks before it arrives?
No stock is without risk, and that includes the trio mentioned above. Fortunately, the above stocks offer investors a tasty dividend, defensive appeal, and plenty of growth potential.
In my opinion, one or all would do well as part of a larger, well-diversified portfolio.
