In the last 12 months, the TSX has switched from bearish to bullish multiple times, and this cyclical performance might continue for a while. For investors that make short-term investments, buying cyclical stocks in this market may have been beneficial, as they could benefit from the short-term bursts many of these stocks offered, assuming they entered and exited their positions at the right time.
However, if you aim to buy and hold good stocks in the long term, you should keep an eye on a couple of cyclical stocks that may prove worthy holdings in the next bull market.
Magna International (TSX:MG) is one of the most prominent names in the Canadian automobile industry. It’s a diversified manufacturer that offers a wide range of automobile solutions, including vehicle bodies, power trains, and seats. It also manufactures complete vehicles for different clients, and since its inception, it has developed over four million complete vehicles (32 different models).
The company focuses on innovations in various automobile technologies, which gives it a strong footing in the current market, which is on the verge of switching from conventional vehicles to electric vehicles (EVs) and other eco-friendly options. Magna International is also a decent dividend stock.
The company is currently trading at a heavy 45% discount from its 2021 peak, and the correction has inflated its dividend yield to 3.6%. It’s a well-established Dividend Aristocrat and has grown its payouts for 13 consecutive years. The discount also indicates the possibility of a strong recovery and growth in the next bull market, making it a good time to consider adding this stock to your portfolio.
Bank stocks in Canada are coveted for their stability and dividends, and modest capital-appreciation potential in the right market. Canadian Imperial Bank of Commerce (TSX:CM) is no exception to this sector-wide trend.
The last five-year performance hasn’t been very promising, but the stock showed its ability to grow steadily in the last long-term bull market. It rose by over 125% between Apr. 2009 and Apr. 2018.
CIBC stock is currently trading at a 30% discount, which has pushed the yield of this Aristocrat up to 6%. With a price-to-earnings ratio of 11, it’s quite fairly valued right now, and the dividend and discount combination offers a good investment opportunity.
If the stock starts growing at a decent pace in the next bull market, you will be able to capitalize on the appreciation. Also, if you buy now, you will lock in a yield that will start to become less attractive as the stock goes up.
It’s difficult to pin down the next TSX bull market phase, which lasts for years instead of a few months. It may begin in 2023, or you may have to wait till next year to see the beginning of a long-term bull market. However, it’s imperative that you buy the right prospects (like the two stocks above) before the bull market is in full momentum.