Dozens of new securities register on the TSX and other Canadian markets at any given year, but their experiences can be widely different. Some highly anticipated listings may experience a powerful surge on their first day, while others may keep toiling in anonymity and low valuation for weeks.
Many investors stay clear of newly listed stocks because there is not enough performance or, in some cases, financial data at hand to make an informed decision about them. But it’s still a good idea to keep an eye on them so you have the chance to jump on early if a strong bullish trend is building up. Two stocks joined the TSX this year that you may consider keeping an eye on.
A cannabis company
Cannabis stocks, which were once among the most lucrative securities in Canada, have turned into a relatively risky asset class that has just as much chance of burying your capital as they had of doubling it in a matter of months (if there is optimism in the market). A new cannabis company may look even riskier, but that wouldn’t be a fair evaluation of TerrAscend (TSX:TSND), which joined the TSX in July.
TerrAscend’s financials are in much better shape than many stocks that have been on the list for far longer. It’s a new stock but represents a mature cannabis company with eight brands under its name. The company has a serious amount of debt, but considering its yearly revenues that have grown at a powerful pace between 2020 and 2022 and the cash and cash equivalents, the debt doesn’t seem that scary.
As a stock, it hasn’t yet displayed a strong trend either way, and it’s too soon to tell whether it will follow the pattern of other marijuana stocks or will break out of the industry’s weak trends on account of its strong finances. Either way, it’s a stock worth keeping an eye on.
A battery metal company
Thanks to lithium’s rising demand as the chief battery metal in the current electric vehicle era, lithium mining stocks have been rebranded with a far more attractive label (i.e., battery metal stocks). One of Canada’s newest additions to this list is Lithium Royalty (TSX:LIRC), which joined the TSX in the later days of the first quarter (Q1).
Lithium Royalty may not be an appealing pick if you analyze it solely from the perspective of its current finances. However, it has virtually no debt and a significant cash position, which shows that the company may have the necessary funds to sustain or grow its operations if needed. But its business model is an even more compelling reason to consider this stock.
As a royalty company, it doesn’t engage in mining activities itself. Instead, it holds royalties in 32 projects in seven countries, all dedicated primarily to lithium. So far, the stock has lost about a third of its valuation since inception, but that may change in the future, as Lithium prices and demand go up rapidly.
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Foolish takeaway
The two newcomers on the TSX have yet to show their strength on the market but their fundamental strengths at least warrant investor attention. Keeping an eye on them might help you identify the starting point of a long-term bullish trend, and if you get in at the right time, you may significantly boost your overall return potential.
