3 Top Stocks for the Second Half of 2022

Canadian National Railway (TSX:CNR) is one stock I’d hold in the second half of 2022. There are two others.

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Are you looking for top stocks to buy in the second half of 2022?

In general, it has gotten harder to find them. Stocks have rallied hard this year, making cheap or modestly valued names difficult to find. Tech stocks have soared to highs not seen in over a year, in some cases all-time highs. Not many bargains are available in that space. Nevertheless, reasonable buys can be found. In industries like transportation, banking and energy, many stocks remain cheap. In this article, I will explore three top stocks I would buy in the second half of 2022.

CN Railway

Canadian National Railway (TSX:CNR) is Canada’s biggest railroad, shipping $250 billion worth of goods each and every year across Canada and the United States. The large volume of goods the company ships makes it economically indispensable — a valuable advantage for a company to have!

CN Railway has an excellent competitive position. It has only one major competitor in Canada and only a small handful of them in the United States. When companies have few competitors, they tend to have pricing power, which results in high margins. This is certainly the case with CN Railway, which has a 30.6% net profit margin.

CN Railway’s most recent quarter was a bit of a disappointment, with misses on revenue as well as earnings. Revenue and earnings both declined. This should not be taken as indicative of a long-term trend. Transportation is a cyclical industry whose fortunes rise and fall with the business cycle. Economic downturns are temporary, so any weakness in CN Railway in the months ahead should be seen as a buying opportunity.

TD Bank

Toronto-Dominion Bank (TSX:TD) is a Canadian bank, the second biggest in the country by market cap and the biggest by assets.

TD Bank has proven itself to be remarkably resilient over the years. In its most recent reported quarter, it achieved positive growth in revenue; earnings declined but only because of an increase in provisions for credit losses (PCLs). Apart from that one factor, earnings growth would have been positive.

2023 has been a busy year for TD. Between concluding the Cowen deal and having the First Horizon buyout cancelled, the company has had a lot on its plate. Through it all, the company has delivered respectable earnings results. If the U.S. banks’ recent earnings releases are anything to go off of, TD’s upcoming release shouldn’t disappoint.

Suncor Energy

Suncor Energy (TSX:SU) is a Canadian energy stock that has underperformed the markets this year. Down 4% for the year at a time when the TSX index is making positive gains, it has disappointed investors. That’s precisely why the stock is such an intriguing buy today.

Trading at a mere five times earnings, and sporting a 5% dividend yield, the company is priced almost as if it were going out of business. But with the Organization of Petroleum Exporting Countries cutting output and COVID-19 lockdowns a thing of the past, oil prices should stay reasonably healthy for the foreseeable future. Suncor’s profit margins should be healthy as well.

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 Andrew Button has positions in Toronto-Dominion Bank. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

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