The past few days have been good for the TSX and Nasdaq as the U.S. June inflation of 3% was lower than the 3.3% rate in May and below the expectation of 3.1%. It has increased investor optimism around an interest rate cut by the U.S. Fed in its September meeting. The TSX Composite Index surged 4% in the last week.
If you are looking to buy a TSX stock today, you have a few options depending on your investment tenure.
Which TSX stock is best to buy today?
Since inflation is cooling, companies in discretionary consumer spending are a good investment. They will benefit from lower interest rates and higher purchasing power.
Stock for short-term returns
If you are looking for returns in less than 12 months, you could consider buying seasonal stocks like Shopify (TSX:SHOP). The e-commerce stock earns a significant portion of its revenue during the November and December holiday season sales. The stock has already surged 7% in the last two days. It is not too late to jump into the rally as there is an upside of 25-30%. Shopify could repeat the 2023 seasonal rally and jump past the $120 stock price.
Beyond the holiday season, the company is free from the impact of the sale of its logistics business in June 2023. The company now has a lower base year with no Logistics Business revenue. Any revenue growth would reflect the development of the streamlined Shopify business. The stock could begin its long-term journey toward economic recovery.
You could buy the stock now and sell it when it crosses the $120 mark, or you could hold it to benefit from the secular growth trend of e-commerce adoption.
Stock for medium-term returns
If you want to hold a stock for three to five years, you could consider investing in cyclical stocks that failed to pick up momentum because of high inflation and interest rates.
Magna International (TSX:MG) stock surged 6.3% in the first half of July over hopes of economic recovery. The auto component maker has been in a downtrend since 2021 due to several short-term headwinds, which halved its value. The last headwind was a demand pullback in the automotive sector as consumers postponed their purchases until financing became favourable. An interest rate cut could revive automotive loan demand and bring back the pent-up car demand.
Magna has been waiting patiently for the cyclical upturn. It restructured its business to improve efficiency and increase capacity to cater to cyclical demand. The stock could surge past the $100 mark as it rides the electric vehicle wave, representing a growth of more than 60% in the coming three to five years.
Stock for long-term returns
If you want long-term returns, consider getting exposure to real estate stocks. You could opt for a real estate investment trust or Dye & Durham (TSX:DND), the legal practice management software with almost 43% revenue exposure to real estate transactions. The stock lost 70% in market value since the beginning of 2022, as it suffered from the 2022 tech meltdown and the real estate correction.
Moreover, two failed acquisitions of TM Group and Link inflated its finance costs and increased its losses. The effect of these acquisitions will fade in August, and the company will return to double-digit revenue growth. Moreover, it is focused on reducing its debt, with the management looking to pay down $185 million from its $1 billion total debt. A reduction in interest rates will help the company reduce its interest expenses.
Its niche vertical and mission-critical application could help the company grow its recurring revenue steadily over the long term.
