How to Exploit the TSX’s Current Weakness for Long-Term Gain

Two outperforming stocks are buying opportunities if you want to exploit the TSX’s weakness for long-term gains.

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Upwards momentum

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Timing the market is impossible, and even the GOAT (greatest of all time) of investing believes it’s a waste of time. Warren Buffett admits he never timed stocks. He also never had an opinion about the market because it wouldn’t be any good. It’s a distraction that might interfere with his good opinions.

Instead of timing the market, an option is to exploit its weakness. The TSX has been going through perennial spikes and dips for most of 2023 due to elevated volatility. Still, several businesses benefit from the current headwinds, and their stocks outperform.

Bird Construction (TSX:BDT) and Doman Building Materials (TSX:DBM) have market-beating returns thus far in 2023, although the rebound of the construction industry isn’t due until 2025. Instead of sharp drops, their stock prices soar to new highs. BDT is up 50.83% year to date, while DBM has a 19.87% positive return.

Strong business momentum

Strong business momentum is behind Bird Construction’s upward trend this year. The $634 million company provides construction services in Canada. At $11.79 per share, the stock pays a decent 3.64% dividend.

In the nine months that ended Sept. 30, 2023, revenue and net income climbed 16.6% and 36.4% to $2 billion and $47.65 million compared to the first three quarters in 2023. Notably, at the end of the third quarter (Q3) of 2023, Backlog and Pending Backlog reached $2.2 billion and $825.2 million, respectively.

Its president and chief executive officer (CEO), Teri McKibbon, said, “Bird is positioned as a leading collaborative construction and maintenance company focused on the industrial, institutional and infrastructure markets.” He noted the significant growth in all markets, public and private, especially institutional buildings.  

“We remain disciplined in our approach to project selection and in improving our margin profile so that we can continue to drive further improvement in the company’s results through 2024,” added McKibbon. Bird’s presence in the nuclear sector is likewise growing.

The latest contract awards include the construction of Seneca Health & Wellness Centre, a multi-story health and wellness complex. Bird also secured a new multi-year task order worth over $130 million from Canadian Nuclear Laboratories. Market analysts recommend a strong buy rating. Their 12-month average price target is $15, a 27.2% potential price appreciation.

Strong business platform

Doman displays stability despite a challenging economic environment. Current investors enjoy a mouth-watering dividend of 8.64% on top of the nearly 20% year-to-date gain. If you invest today, the share price is only $6.48.

The $563.92 million company distributes building materials in North America. Doman is also Canada’s lone fully integrated national distributor in the building materials and related products sector. In Q3 2023, net earnings soared 81.9% to $21.15 million versus Q3 2022.

Its board chairman, Amar S. Doman, said, “I am very pleased with the strength of our business model and our financial performance during current market conditions, which include much volatility and macroeconomic headwinds.” He added the solid quarterly and year-to-date results validate the strength of the business platform on both sides of the border.

Excellent buying opportunities

Bird Construction and Doman Building Materials are excellent buys for long-term gains. Expect the stocks to sustain the upward trend whether the TSX ends the year with a loss or gain. As of this writing, Canada’s primary stock market is up 3.76% year to date.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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