Buying the dip in stocks of companies with strong fundamentals could be a solid strategy. This way, one can own shares at a lower price and benefit from the recovery rally. However, investors should take caution and focus on shares of the companies that have lost value due to the temporary challenges and can quickly bounce back in the future.
Against this backdrop, let’s look at three Canadian stocks you can buy now at a discounted value and hold for the next five years for big profits.
Let’s begin with Cargojet (TSX:CJT). Canada’s leading air cargo company has delivered multifold returns over the past decade and made its investors rich. Notably, the company was one of the top beneficiaries of the pandemic, which resulted in solid demand, significantly boosting its share price.
However, economic reopening, normalization in demand, and macro headwinds impacting consumer spending dragged its stock down, which has declined by about 22% over the past year.
Nonetheless, this dip in Cargojet stock is an excellent opportunity to buy it. The company’s top line will likely benefit from long-term customer contracts with minimum volume guarantee, expansive domestic network, next-day delivery capabilities, and a high customer retention rate. Further, an expected recovery in e-commerce demand will accelerate its growth rate.
Adding to my optimism is the company’s strategic partnerships with the leading logistics brands that are accretive to its earnings and add stability to its cash flows. Furthermore, new cross-border and international opportunities, focus on cost-reduction, and its low leverage profile augur well for long-term growth.
Next up is Nuvei (TSX:NVEI). Shares of this payment processing company decreased more than 50% in one year. Adding to the shareholders’ pain, management slashed its 2023 revenue guidance last month, citing its decision to exit a relationship with a large customer and longer-than-expected lag times to begin generating revenue from new business.
Despite the short-term weakness, I am bullish about Nuvei stock due to its focus on expanding its rapidly growing core global commerce channel. In addition, its emerging B2B (business-to-business), government, and integrated payments channel has solid growth potential. Moreover, its focus on strategic acquisitions will likely expand its addressable market and drive significant growth.
Overall, its discounted valuation, solid long-term growth prospects, and focus on deleveraging its balance sheet bode well for future growth.
Shares of fashion house Aritzia (TSX:ATZ) have dropped more than 52% in one year, providing a solid opportunity for investors to go long on this high-growth company. Despite short-term headwinds, Aritzia’s fundamentals remain intact, reflected by its growing earnings base.
It’s worth highlighting that Aritzia’s net revenue has grown at an annualized growth rate of 26% between fiscal 2019 and fiscal 2023. Moreover, its adjusted net income has increased at a CAGR (compound annual growth rate) of 23% during the same period.
Looking ahead, Aritzia’s management expects its revenue to grow by a CAGR of 15-17% through 2027. Aritzia’s new boutique openings, focus on bringing newness across its offerings, and strength in the e-commerce business will support its top line. Meanwhile, higher sales and cost-saving initiatives will cushion its bottom line and lead to a recovery in its shares.