The Canadian stock market has been on a tear over the past three months. Since late October, the S&P/TSX Composite Index is up more than 10%. The index is now nearing all-time highs, which were last set in early 2022.
Despite the recent surge, there are still plenty of deals to be had on the TSX. Many Canadian stocks continue to trade at discounted prices, providing opportunities for long-term investors who are willing to be patient.
When it comes to hunting for value stocks, it’s important to understand why shares are trading at a discount in the first place. Is there a flaw in the business itself, or is there a greater industry-wide slowdown that is to blame? Perhaps it’s even a bit of both.
Deciding why a stock is trading at a certain price will never be cut and dry. There’s always going to be two sides to a story, making it difficult to determine whether a discounted stock is a value play or a value trap.
Investing for the long term
Having a long-term time horizon allows you to take a larger chance on a beaten-down stock. Trying to predict the length of an industry-wide headwind is an incredibly difficult undertaking. But, if you’re a believer in the company’s long-term growth potential, the length of a short-term headwind shouldn’t be all that concerning for you. That is, however, as long as you have the appropriate investing time horizon.
With that in mind, I’ve reviewed two value stocks that I strongly believe are trading at must-buy prices. Both picks have a history of delivering market-beating returns but have struggled as of late. But with plenty of potential still in front of them both, I don’t think these bargain prices will last long.
Value stock #1: goeasy
Investors hoping to load up on goeasy (TSX:GSY) at these bargain prices will need to ask fast.
The growth stock has shot up more than 50% since last October. With that surge, shares are now down just 30% from all-time highs. Even with that discount, though, goeasy has still crushed the market’s return over the past five years, delivering just shy of 300% in gains to its shareholders.
The company has unsurprisingly seen demand decline as interest rates have spiked. With interest rate cuts to happen as early as this year though, it’s also not surprising to see the stock rebound positively in recent months.
Don’t miss your chance to load up on a top growth stock that rarely goes on sale like this.
Value stock #2: Northland Power
Northland Power (TSX:NPI) is another example of a Canadian stock that’s been hit by a broader industry-wide slowdown. The renewable energy space as a whole has been on the decline since early 2021.
Putting the sector’s volatility aside, the long-term growth potential of renewable energy consumption across the globe remains firmly intact. That’s why now could be an excellent time to put some money into a Canadian leader like Northland Power.
Shares of Northland Power are down more than 50% since the beginning of 2021. But that also doesn’t take into consideration the company’s dividend, which is currently yielding close to 5%.
It may take some time for the renewable energy sector to get back on track. But at least while you wait, Northland Power can be a dependable passive-income generator.
