The entire market isn’t doing so well, but there are still some top companies on the TSX today that are way below where they should be. Yet one continues to stand out recently for investors seeking a long-term investment for a deal. I’m going to focus on this one oversold stock that continues to be a must-buy for those wanting long-term gains and income.
Labrador Iron Ore
Labrador Iron Ore Royalty (TSX: LIF) currently trades with a Relative Strength Index (RSI) at 27.38 as of writing. The oversold stock also has seen shares fall about 14% in the last year, after climbing between November 2022 and March 2023.
Yet a steep drop off occurred over the last few months. Shares of Labrador stock are down 26% since 52-week highs, providing investors with a deal, if there is one. So, let’s look at why investors may want to consider this stock, according to analysts.
The climb and the fall
Let’s look at what caused Labrador stock to climb so far during the lats few months by harkening back to the oversold stock’s earnings back in January. The company saw an increase in its potential target price, as 2023 earnings forecasts proved quite strong.
The oversold stock offers investors exposure to the iron ore industry, which should continue to provide strong growth in the steel and iron ore markets. What’s more, it’s a royalty company, so it brings in significant income that isn’t dependent on the sale of iron ore, though much of its cash flows comes from its sale as well. Historically, we were getting more cash for a lower risk.
So, what happened? Back in March, the company came out with results from operations in 2022 that came in lower than expected. The price of iron ore dropped, lowering guidance as well.
The 2023 guidance for sales is only slightly higher than 2022 levels, with costs climbing as well. This comes from investing in sustainable methods of production, which should become a huge cost burden in the next few years. So, a combination of lower prices and higher costs certainly caused the company to drop.
Why buy?
Long-term investors should certainly consider Labrador stock while it’s in oversold territory. Again, it’s a royalty stock, so it comes with less risk, even with costs climbing and prices dropping. These are short-term issues that are setting up for long-term gains.
The oversold stock is affected by the shift to clean energy, but it’s providing it with future opportunities during this investment process. This includes in North America and the Middle East to produce hot briquetted iron with hydro-based green hydrogen and high-grade iron ore, according to management.
Meanwhile, investors can use this opportunity to pick up the oversold stock and its forward 10.34% dividend yield as of writing. And should shares reach 52-week highs once more, that currently provides a potential upside of 34% as of writing. So, investors should certainly consider a long-term hold in this oversold stock while it lasts.
