Beginners’ luck might have worked for many in the stock market, but it won’t always. Short-term gains might earn you a few thousand dollars, but only the long-term investors make it to the billionaire leagues. Beginning early can give you the advantage of a longer investment horizon.
Five Canadian stocks for beginner investors
We are in mid-2024 and one interest rate decision can determine the course of the stock market. Now is an opportune time to buy stocks with robust operations and profits that have stood the test of time.
Growth stocks
Hive Digital Technologies (TSXV:HIVE) is a blockchain technology company that has stood the test of time through two crypto-bubble bursts, the Ethereum merge, and the pandemic. The company does not have long-term debt. Whenever it needs money, it sells the mined Bitcoin and builds or upgrades data centres. Hive also increased its revenue sources by validating transactions. It is offering its data centres for high-performance computing.
The stock is volatile as it moves alongside Bitcoin prices, which tend to do well in a strong economy. While you cannot invest in crypto through a Tax-Free Savings Account, you can invest in Hive and benefit from the next crypto bubble and artificial intelligence boom. However, only buy the stock near its 52-week low or below $4 due to volatility.
Unlike Hive, you can buy Descartes Systems (TSX: DSG) stock while it is in a long-term growth trend. Descartes helps companies streamline and efficiently manage their supply chain and logistics department by bringing all parties onto one platform. Whether it is compliance, inventory management, or route mapping, Descartes provides a range of services across various verticals. No matter the secular trend, the supply chain facilitation continues and Descartes’s stock keeps growing consistently.
The above two stocks can appreciate your capital. If you buy them now and hold them for three to five years, they can double your money.
The undervalued stock
Air Canada (TSX: AC) stock never recovered after the pandemic dip even when air travel recovered and the airline surpassed its 2019 revenue and net profit. It has a higher passenger load factor and earnings per share (EPS) than in 2019. This year, Air Canada also saw the return of business class travellers, which account for a major chunk of an airline’s profit.
Moreover, it has significantly reduced its net debt to $3.8 billion in the first quarter from $7.5 billion in 2022. Yet, the stock trades below $20 at 3.2 times its 12-month EPS. The market is cautious as doubts remain over whether the airline can sustain these numbers. The airline has surely stood the test of time and can surge as the economy recovers. Buying AC stock while undervalued can help you benefit from a recovery rally.
Dividend stocks
Balancing the risk with more assured returns are two dividend stalwarts Enbridge (TSX: ENB) and Telus Corporation (TSX: T). They are range-bound stocks and may not give capital appreciation, because they distribute 60 to 70% of their distributable cash flows as dividends. Enbridge has the largest oil and gas pipeline infrastructure, which facilitates oil exports. Every new pipeline addition brings a new source of revenue and increases its cash flow.
Enbridge has accelerated its portfolio diversification to gas and is completing the acquisition of three gas utilities. To this end, it slowed its dividend growth to 3% from 10% pre-pandemic. However, management expects to increase the dividend growth rate to 5% by 2017.
Like Enbridge, Telus also enjoys regular subscription cash flow from its telecom infrastructure. However, the telecom sector is undergoing a major technological and regulatory transition. Thus, Telus stock is trading at its 52-week low. The management will find a way to capitalize on the 5G opportunity while tackling the regulator’s request to share its network with competitors. While Telus may not maintain its 7% dividend growth in the long term, even moderate 5 or 3% growth can help generate inflation-adjusted passive income.
In any given situation, you will at least have a 7% return.
