Will Canadian stocks stage a bull run with inflation cooling and the Bank of Canada holding interest rates steady? Given these latest developments, it seems logical to assume that a rebound is on the on the horizon. As of this writing, only energy from the 11 primary sectors is in negative territory.
Investors can prepare and pick bargain stocks from different sectors before the bulls charge soon. Four underperforming names could deliver considerable gains if the bull market materializes in 2023.
Technology
Technology is the top-performing sector thus far this year, although some growth-oriented companies remain in the red. At $10.32 per share (-23.02% year to date), Absolute Software (TSX: ABST) trades at a deep discount. Market analysts are bullish, so buy this tech stock on weakness.
The 12-month average price target is $18.76, or a return potential of 73%. Absolute Software is a rare gem considering it also pays a decent 2.95% dividend. This $579.9 million company provides self-healing, intelligent security solutions to help customers strengthen their cyber resilience and combat ransomware threats and malicious attacks.
Energy
The pullback of Advantage Energy (TSX: AAV) is temporary due to falling oil prices. However, industry experts say that while oil prices are reasonably contained, they should remain elevated due to the Organization of Petroleum Exporting Countries’s production cuts. If you invest today, the small-cap stock trades at $7.55 per share (-20.27% year to date).
This $1.25 billion oil and gas producer reported exceptional results last year. Total sales (natural gas and liquids) rose 93% to $950.4 million versus 2021. While net income declined 18% year over year to $337.7 million, free cash flow jumped 222% to $275 million. Notably, the working capital surplus increased 942% to $71.5 million from a year ago.
Communications services
In the first half of fiscal 2023 (six months ended February 28, 2023), Cogeco Communications (TSX: CCA) saw its revenue increase by 4% to $1.49 billion versus the same period in fiscal 2022. However, profit declined 5% year over year to $224.6 million.
The $2.97 billion company provides internet, video and phone services residential and business customers in Canada (Ontario and Québec) and 13 states in the United States. Management’s goal is to be a competitive force in North America’s telecommunications sector.
Based on market analysts’ forecasts, the stock price could rise by 22% to $81.07. Cogeco trades at $66.33 per share (-12.62% year to date) and pays an attractive 4.68% dividend.
Real estate
Real estate was among the worst-performing sectors in 2022, but Primaris (TSX: PMZ.UN) was an exception, as the stock delivered an overall gain of 24% for the year. The $1.32 billion real estate investment trust (REIT) is relatively new and is a spinoff of H&R REIT’s enclosed shopping mall portfolio.
Its chief executive officer Alex Avery said, “We see a long runway of growth opportunities, spanning occupancy improvement, increasing rental rates, reinvesting to enhance select shopping centres, recycling capital and growing our portfolio through acquisitions.” While the REIT is down 5.36% year to date ($13.66 per share), the 5.89% dividend yield compensates for the pullback.
Raring to charge
The bulls are raring to charge if the downward trajectory of inflation sustains and the central bank ends its rate-hike campaign this year.
