Beginner’s Guide to Canadian Stocks: Top Investment Choices for 2023!

It is a great year to begin investing in Canadian stocks. The overall economic weakness has made some top investments available at a bargain.

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2023 is a great time to invest in Canadian stocks, as the market remains in bearish momentum. To begin investing, you first need to open a Tax-Free Savings Account (TFSA), as it allows your investment to grow tax free and even lets you withdraw tax free. When starting your investing journey, you don’t want the Canada Revenue Agency taking a huge tax bite from your returns. 

Things beginners should consider when buying stocks

The most important aspect of investing is choosing the stock and deciding when and how to invest. The stock market offers several options, as different stocks give returns differently. Some give momentum returns in the short term; some offer significant returns in the long term; and some give regular returns through dividends. 

While stocks carry risk, some small- and mid-cap growth stocks have a higher risk than large-cap dividend stocks. Remember, not every stock you invest in will give positive returns. Different stocks react differently to the market and business environment. Hence, it is a good practice to diversify your investment portfolio across stocks moving in opposite directions. 

Top investment choices for 2023

The company’s earnings potential determines its share price. Hence, look for stocks that have the potential to grow earnings in future.

In 2023, the overall economic activity is slowing, and fears of a recession are looming. The markets are sensitive to interest rate hikes, as they make mortgages expensive. Inflation is easing by slowing demand. At times like these, avoid companies with significant debt maturing in 2023 and 2024. 

Growth stock

This bearish momentum is the time to invest in stocks that will grow when the economy recovers, like logistics, banks, green energy stocks, electric vehicles, and technology. Descartes Systems (TSX:DSG) is a mid-cap growth stock in a long-term uptrend. It has been making strategic acquisitions in a bear market to expand its supply chain management offerings. While the stock reacts to the macro environment, the company’s revenue and profits remain strong. The supply chain issues, sanctions on Russia, shifting supply chain away from China, and the energy crisis created a demand for Descartes’s global trade intelligence solutions. 

Descartes is among the few tech stocks that completely recovered and reached closer to its tech bubble peak. Descartes stock will fall as the economy slows. But it has the potential to revive and continue growth as the economy recovers. The company caters to airlines, e-commerce, and energy companies, and any company with significant logistics and supply chain requirements. You can buy the stock below $95 and hold it for five to seven years to see a 50-80% growth. 

Ballard Power Systems stock

While investing in growth stocks, you can invest some amount in a high-risk, small-cap hyper-growth stock Ballard Power Systems (TSX:BLDP). The company is perfecting its hydrogen fuel cell technology to power heavy vehicles like buses, trains, and boats. It has also started receiving orders, as governments worldwide are pushing for the adoption of green hydrogen.

However, Ballard Power has a long way to generate profits, as manufacturing green hydrogen cells is still expensive. But the company has $900 million in cash to keep funding its research for a long time. Its stock will remain sensitive to economic activity in the short term. But it has the potential to grow your money 10 times in the long term when wider adoption of hydrogen fuel becomes a reality. 

A passive-income stock 

While investing in growth stocks, balance your risk with a large-cap dividend stock Enbridge (TSX:ENB), which can give you passive income, even in a recession. The pipeline company has a 67-year history of paying dividends and growing them annually for 27 years in a row, despite the pandemic, the 2014 oil crisis, and the 2008 Financial crisis. Enbridge’s vast pipeline infrastructure generates enough toll money to pay dividends, repay loans, and fund new pipelines. 

You can buy this stock anytime during the year and lock in a dividend yield of over 6% for the long term. It can give you quarterly passive income and reduce your portfolio’s downside risk. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Descartes Systems Group and Enbridge. The Motley Fool has a disclosure policy.

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