TSX stocks have been on a roller coaster ride in 2023. The S&P/TSX Composite Index experienced drawdowns of 5% or more on four separate occasions this year. Despite the volatility, on each occasion, it recovered from its losses. Today, the TSX sits with a modest 3.77% gain for the overall year.
Given its concentrated exposure to energy, materials, and financial stocks, the TSX is not the greatest market to index. Canadian investors are better off taking a stock pickers approach.
Sometimes, the best opportunities are when a high-quality stock is beaten up due to temporary issues. While those issues can last for a while, a superior business tends to fight back quickly and keep generating good returns over the long term. Here are three great TSX stocks to consider picking up with a $5,000 investment in December.
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A transport stock for long-term returns
This could be the case with TFI International (TSX: TFII). TFI is one of Canada’s largest transportation, trucking, and shipping businesses. It has operations across Canada and America.
The company has generated exceptional returns over the past decade. Its stock is up 530%! That is a compounded annual growth rate of 20%. Add in its dividends, and its total compounded annual returns equate to 22.8%.
The freight and shipping industry has been in a recession over the past year. As a result, volumes and profits are down. Given a weaker recent quarter, its stock had a 16% drawdown.
The good news is, the company has strong balance sheet with opportunities to continue its consolidation strategy. It is implementing measures to improve profitability and better utilize its network.
This TSX stock only trades for 15 times next year’s expected earnings. The transport industry likely hit a trough in 2023, so there is good opportunity ahead if you are patient.
A top TSX energy stock
Another TSX stock that is in the dumps is Cenovus Energy (TSX: CVE). It recently pulled back 21%. Given how cyclical energy stocks can be, the best times to buy these stocks are when they have a pullback.
Oil prices have been facing pressure as people worry about an impending global recession. So far, that recession has not materialized, but the market remains worried that there is too much energy supply.
Regardless, Cenovus has been delivering strong results and earning a lot of spare cash. It had some operational challenges earlier in the year, but most of those appear to be in the rear-view mirror. The company is expected to hit its debt-reduction targets by mid-year 2024.
Once it does that, investors can expect to 100% of its excess cash flow in the form of share buybacks, base dividend increases, and maybe even a special dividend. If you can wait for six months, there could be some attractive rewards ahead.
A TSX retail stock on a pullback
Another TSX stock to consider adding to in December is Alimentation Couche-Tard (TSX: ATD). The company recently delivered quarterly results that were slightly below the market’s expectations, and the stock fell by about 5%.
Despite some weakness in its merchandising business, the company has several intriguing catalysts. The company is expected to fully acquire a large +500 store portfolio in Europe at the end of the year.
Likewise, it added a smaller 112-site portfolio that expands its presence into several new American markets. Further, it opened 40 new stores this year that will start contributing to organic revenues and profits in 2024.
Today, this TSX stock trades for 17 times earnings. That is an attractive price if it can hit its target to double its business over the next five years.
