July saw an uptick in some stocks as global macros showed optimism. The Fed hinted that the United States could avoid a recession. And China announced a stimulus package to boost the economy after the end of COVID lockdowns. This global optimism also benefited some Canadian companies and drove their stock price up 8-16% in July.
Three top-performing TSX stocks in July
Here are some top-performing stocks that rose higher than the TSX Composite Index, which rose 2.3% last month.
Magna International
Magna International (TSX: MG) stock surged 13.4% in July, picking up on its 14.5% rally in the first half of June. This surge came after losing more than 25% value in early 2023. Magna stock fell as it reported weak 2022 earnings due to a semiconductor supply shortage. The auto component maker is recovering from this shortage and fulfilling the orders left unfinished due to the chip shortage.
Magna saw a recovery in the first quarter with 11% revenue growth and even increased its 2023 revenue outlook to $41.8 billion, up 5% year over year. Even its client General Electric increased its 2023 forecasts, sending auto stocks on a recovery rally. Trading above $84, Magna stock could surge further as it reports positive second-quarter earnings. China’s economic recovery could add to automotive sales.
Magna stock could rally on the electric vehicle (EV) momentum in the short term and autonomous vehicle momentum in the long term. The gap between automotive and tech is fading. The growing features and functionality are making car manufacturing complex. And Magna looks to tap this segment with its contract manufacturing business, which will complement its automotive components business.
If you bought the stock in May for short-term growth, you can hold it till the end of the year and sell it closer to a $90 price point. And if you are bullish on the long-term growth, continue holding it as it could cross the $100 price as it did in early 2021 during the EV boom.
Nuvei stock
Nuvei (TSX: NVEI) stock surged almost 15% in July after falling 38% in May and June because of short seller Spruce Point Capital’s report on Nuvei’s exposure to the bankrupt crypto exchange FTX. It even raised questions about Nuvei’s acquisition of Paya, saying that the latter was losing clients. Spruce Point Capital exited its position in Nuvei towards the end of June, giving the stock a fresh start.
Nuvei’s Paya acquisition is helping it tap enterprise clients with higher cross-border payment volumes. Moreover, its revenue growth moves in tandem with e-commerce volumes. Nuvei stock’s July rally could have been better, but tech stocks saw a pullback in the second half. Now is a good time to buy the stock as it could continue its rally ahead of the holiday season and cross the $50 mark as it did in early 2023.
Suncor Energy stock
While the above two stocks are in long-term growth, Suncor Energy (TSX: SU) saw an uptick of 8.9% in the second half of July when tech stocks fell. Suncor benefitted from a surge in oil prices to US$81 per barrel. China’s stimulus package could boost oil demand, and production curbs by Saudi Arabia could keep oil prices above US$80.
However, I won’t be optimistic about oil stocks as they have already reached their cyclical peak of above $50 in June. Suncor stock is unlikely to reach the $50 mark unless there is another supply shock. In fact, oil prices could fall if the global economy weakens.
If you invested in Suncor for its dividends, continue holding the stock. But if you bought the stock for short-term gains, a $41-$42 price is a good exit point. And if you are considering buying Suncor, now is not a good time as it is in the upper range of its cyclicality. A price below $38 is a good entry point, as oil has decelerated growth in the long term.
