With all the economic uncertainty these days and a stock market in limbo – waiting for inflation to cool and interest rates to fall – long-term investors have ample opportunities to add cheap stocks to their TFSAs before they rally.
Looking back, these decisions will seem obvious. However, going against the grain to buy a stock while it’s ultra-cheap is never as straightforward as it appears. It’s easy to get caught up in the negative news surrounding a particular stock or sector.
While you can’t ignore these factors, and it’s crucial to understand how a business is performing and the current impacts it faces, the best time to buy is often when these impacts are clearly temporary.
And in this environment, there continue to be plenty of high-quality stocks that are only being impacted due to the current market environment, and which continue to have significant growth potential over the long haul.
So, if you’ve got cash in your TFSA today and want to take advantage of the current market landscape, here are two of the best stocks to buy now while they’re still unbelievably cheap.
A top Canadian retail stock with plenty of growth potential
Prior to the slowdown in the economy, Canadian Tire (TSX:CTC.A) was one of the best growth stocks you could buy in the retail sector.
Plus, because Canadian Tire is such a massive and well-established stock, not only does it offer plenty of long-term growth potential, but it also pays an attractive dividend with a current yield of 4.8%.
However, with higher-than-normal inflation and now higher interest rates dampening consumer spending, Canadian Tire has seen a temporary impact on its sales and profitability.
Furthermore, to make matters worse, it has also experienced a negative impact on its sales in recent quarters due to seasonality and a much milder-than-normal winter this year.
For investors with cash on the sidelines, though, and their eye on the big picture, these temporary impacts causing the stock to fall by more than 30% from its 52-week high at its worst point this year, shows what an incredible opportunity there is to buy one of the best retail stocks in Canada while it’s unbelievably cheap.
This morning, Canadian Tire reported positive earnings for the first time in the last few quarters; and as a result, its shares are already up roughly 6.5% by midday.
Canadian Tire smashed earnings expectations, reporting normalized earnings per share (EPS) of $1.38, compared to expectations of just $0.72, thanks largely to significantly better gross margins this quarter.
Yet even with the stock up significantly to start the day and beginning to recover, Canadian Tire is still considerably cheap.
So, if you’re looking to buy high-quality stocks in this environment while they’re still undervalued, Canadian Tire is one I’d watch closely and consider soon, as it could continue to see a strong recovery over the coming quarters.
One of the best growth stocks on the TSX to buy while it’s still cheap
In addition to Canadian Tire, another of the best growth stocks in Canada that’s unbelievably cheap today is Cargojet (TSX:CJT).
Just like Canadian Tire, Cargojet has significant long-term growth potential, yet it’s trading ultra-cheap today due to the negative impacts on its business in the current environment.
Cargojet has been a top growth stock in the past and continues to have significant potential going forward, largely due to the growth in popularity of online shopping and the increased demand for overnight deliveries.
Key customers, such as Canada Post and Amazon, are another advantage. Also notable is that the industry does have considerable barriers to entry, putting Cargojet in an excellent position going forward as the e-commerce sector inevitably innovates and expands.
However, in the near term, with consumer spending being impacted by the current environment, Cargojet is also being temporarily impacted, which has caused the stock to fall by more than 50% from its all-time high reached back in late 2020.
Therefore, with Cargojet trading at a forward enterprise value (EV) to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio of just 8.1 times, below its five-year average of 10.8 times, as well as its potential to see considerable growth in the coming years when the economy recovers, there’s no question it’s one of the top stocks to buy now while it’s still cheap.
