Some of the worst-performing stocks in any given market can be the most compelling additions to your portfolio if you can buy them at the right time — i.e., when they are ready for a long-term and powerful recovery.
This may seem similar to buying stable growth stocks after a market crash that temporarily devalues them. Still, it’s a relatively riskier approach, though the reward can be proportionate (or even better) than the risk you are taking.
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A tech stock
Telus International (TSX: TIXT) is one of the ways the Canadian telecom giant has diversified its operational mix. Telus International is an IT service company specializing in Customer Experience (CX) solutions. The company has already grown its client portfolio to over 50 companies hailing from various geographies and industries.
The year 2023 hasn’t been good for the company despite being good for the tech sector as a whole. The stock was already on a downward path since the beginning of the year, but the situation was aggravated when the company re-evaluated and shared the annual outlook for its revenue. This pushed the overall slump for the year (to date) to over 55%.
There may be a better time to buy it, even for its recovery potential. A much better time to buy may be the next earnings report. If the company overshoots its outlook estimate, it may trigger its recovery journey.
A marijuana stock
Apart from 2018, 2019, and, to an extent, 2021, it has become difficult to find a “good” year for the cannabis stocks in Canada, and 2023 is no exception.
The performance of former giants like Canopy Growth (TSX: WEED) is a good example, as it has joined the ranks of the worst-performing stocks this year. Despite a small bullish phase at the beginning of the year, the stock has lost about 70% of its valuation in 2023 and is currently trading below $1.
However, the probability of another recovery is growing. Marijuana restrictions may be easing up in the US, and the optimism surrounding a massive new marketing opening up across the border is already having a positive impact on the cannabis stocks in Canada.
Canopy Growth has surged over 70% in just one week, and if this momentum continues, it may lead the stock to new heights. Ironically, it would only need to reach its 2023 peak to more than triple your capital if you buy now.
An organic food company
Brampton-based SunOpta (TSX: SOY) is all about sourcing fruits and vegetables from farms and farmers that follow organic farming practices. The company then uses these fruits and vegetables to develop a range of food and beverages. This includes toppings, frozen smoothie bases, etc.
SunOpta was going down on the slope that started in the last quarter of 2022, and its second-quarter results worsened the situation. The revenues of the company and, consequently, operating income slumped quite a bit from the first quarter to the second.
However, the company recently got a strong vote of confidence. Credit Suisse, a major European bank, significantly introduced its position in SunOpta on the optimism around organic food demand. It may restore some confidence regarding the stock and you should consider buying when this confidence starts reflecting in the stock’s performance.
- We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if SunOpta made the list!
Foolish takeaway
The three companies are among the worst performers on the TSX this year (so far). Not all of them are worth buying right now, but they are all worth looking into and tracking because the recovery opportunities might be just around the corner.
