3 Stocks I’d Load Up on When They’re Down

These three stocks have outperformed the market greatly in the long run. They’re good considerations for purchases when they are down.

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Stock prices are volatile, and stock investing seems like a gamble. However, it doesn’t have to be a guessing game and speculative play. Adding shares in wonderful businesses when their stocks are down can lead to extraordinary long-term returns. Having a correct investing philosophy helps in creating lasting wealth.

Here are a few stocks I would load up on when they are down because I believe in their businesses and management execution.

Canadian Pacific Kansas City

Since the recovery from the pandemic market crash in 2020, Canadian Pacific Kansas City (TSX:CP) stock price has had strong momentum. This momentum appears to be broken, as the stock just broke under its 50-week simple moving average.

That said, the railway stock has been a market-crushing stock in the long run. In the last 10 years, it delivered returns of about 324% versus the Canadian stock market return of approximately 114%. So, a meaningful correction in CP stock is likely an excellent opportunity to accumulate shares, especially after its merger with Kansas City Southern, which expanded its footprint into Mexico.

Valuation wise, at $98.80 per share at writing, analysts believe the stock trades at a discount of 17%. This quotation also represents it trades at about 25.6 times adjusted earnings. This suggests that the market expects a high earnings growth rate from the merger.

It would be wise for interested investors to wait for the stock to show signs of bottoming before buying shares. For example, a recession in Canada, the United States, or Mexico would hit the company’s bottom line.

Constellation Software

Another growth stock that seemingly trades stubbornly high is Constellation Software (TSX:CSU). In recent trading, it has been more resilient than CP stock, as it still trades above its 50-week simple moving average, which remains in an upward trend.

The top tech stock has delivered such strong earnings-per-share growth in recent years that it’s rare to see it sell off. Constellation Software has greatly outperformed the market in the long run. For example, in the last 10 years, it delivered returns of about 1,550%!

Interested investors should load up if the stock pulled back to the $2,500 range. That said, at about $2,728 per share at writing, analysts believe it trades at a discount of about 11%.

Brookfield Infrastructure Partners

Compared to CP and Constellation Software, Brookfield Infrastructure Partners (TSX:BIP.UN) is a more defensive investment for investors because of its rich cash distribution. At $40.31 per share at writing, it offers a cash distribution yield of about 5.1%.

The global infrastructure stock is committed to increasing the cash distribution by 5-9% per year. This implies that it could deliver long-term returns of at least 10% per year. Indeed, in the last 10 years, the dividend stock has increased its dividend at a compound annual growth rate of about 8%.

BIP.UN is also a market-crushing stock, delivering returns of 320% in the last decade, equating to fabulous annualized returns of about 15.4%.

The stock has been weak in a rising interest rate environment, but its business strategy works through economic cycles, resulting in strong long-term returns. The stock targets long-term total returns of 12-15% per year. Seeing as analysts believe the stock trades at a substantial discount of about a third, it’s a good time to accumulate shares in BIP.UN.

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 Kay Ng has positions in Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure Partners, Canadian Pacific Kansas City, and Constellation Software. The Motley Fool has a disclosure policy.

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