The stock market is showing little signs of reversing course after a red-hot January 2024. Indeed, Aritzia (TSX:ATZ) and Canadian National Railway (TSX:CNR) — or CN Rail for short — are two intriguing Canadian stocks that are starting to pick up a bit of speed.
Even with the bearish calls for a near-term pullback, I continue to favour these two names, as they continue to recover from their respective dips from last year. Both companies have solid long-term growth prospects, a wide moat (it’s the brand power for Aritzia and the untouchable rail network for CN Rail), and valuation metrics that aren’t all too absurd right now.
So, as the market wobbles around in both directions as news, concerns, worries, and hopes to move the needle on stocks on both sides of the border, please consider watching the following plays. Though I’d not be afraid to buy a small starter position at current levels, I would look to another pullback before thinking about buying into a full position.
Without further ado, let’s look into the names that I believe are among the best of the TSX batch for 2024 and beyond.
Aritzia
Aritzia stock has been a laggard for quite some time, as earnings fell short and demand for discretionary purchases sunk. High inflation and macro headwinds haven’t quite gone away yet. But there are finally signs of life when it comes to the consumer. And moving further into 2024, my guess is that things could get even brighter.
Aritzia has a wonderful brand and the ability to create further affinity and awareness with minimal marketing spend. As the tides turn back in its favour, the stock may very well make a run for new highs within the next three years. With a solid management team and so much potential to grow south of the border, ATZ stock looks incredibly timely now that it’s off to the races again.
Today, the stock trades at just shy of $40 per share, up around 85% from its 52-week lows. Could a near-term pullback strike? Perhaps. But I’d view it as more of an opportunistic entry point than a signal that it’s time to throw in the towel. In my books, ATZ stock is one of Canada’s very best mid-cap companies ($4.4 billion market cap) for the rest of 2024.
CN Rail
CN Rail isn’t a stock that’ll shock and awe come quarterly earnings season. That said, it can deliver consistency. And for a long-term investor, consistency is more than you could ask for! The stock still looks cheap, despite rallying almost 20% since its October 2023 lows.
At 20.2 times trailing price to earnings and a bit of momentum by its side, I’d look for a breakout at some point in the middle quarters of the year. Indeed, it may take longer before CN Rail is running back up to full speed. That said, the 1.94% dividend yield is still rich. Though, it certainly would be nice to have another shot at a more than 2% yield and a price-to-earnings multiple below the 20 times mark again.
Who knows? Maybe a market correction could grant value seekers such an opportunity over the coming weeks and months. In any case, CNR stock stands out as a must-watch, if not a must-buy for the long haul! At this juncture, I favour CNR stock slightly over ATZ shares for February.
