The TSX has seen significant volatility in 2024, with some stocks underperforming despite broader market gains. Among the worst performers lately are First Quantum Minerals (TSX: FM), Magna International (TSX: MG), and Canadian Tire Corporation (TSX: CTC.A). Yet while some may see this as a warning sign, others might see this as an opportunity.
So today, let’s look at these three stocks. What’s more, let’s decide whether they belong in your long-term portfolio at these levels.
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First Quantum
First Quantum Minerals has faced a challenging year. In the first quarter of 2024, the company reported a net loss of $159 million and a decrease in copper production due to issues at its Cobre Panamá mine and other operational challenges. The company’s earnings per share (EPS) missed analysts’ expectations by $0.08, reporting a loss of $0.27 per share.
Despite these setbacks, First Quantum remains focused on its Kansanshi S3 Expansion project and improving conditions at its Sentinel mine. The company expects a rebound in copper grades and increased production capacity in the coming quarters. Analysts forecast a slight improvement in earnings for the next quarter, but the company’s heavy reliance on copper prices and operational efficiency will be critical.
So with shares down 51% in the last year, there could be signs of it turning around. In fact, the stock is up 7% in the last three months. So it may be time to get your eye back on First Quantum.
Magna International
Magna International, a key player in the automotive parts industry, has struggled with supply chain disruptions and fluctuating demand. The company reported weaker-than-expected earnings in the recent quarters, which has impacted investor confidence and stock performance.
And yet, Magna is focusing on expanding its electric vehicle (EV) component production, anticipating growth in the EV market. This strategic shift, coupled with cost management initiatives, may improve its financial performance in the medium term. Investors should watch for updates on these initiatives and any improvements in the global supply chain situation.
Again, shares of Magna stock are down 27% in the last year, but up 3% in the last month. So investors may want to keep an eye on upcoming earnings for more clues as to whether a turnaround is coming.
Canadian Tire
Canadian Tire has experienced a drop in sales and profitability, attributed to changing consumer spending patterns and increased competition. The company’s retail segment has particularly suffered, affecting overall financial health.
Now, Canadian Tire is investing in digital transformation and enhancing its e-commerce capabilities to capture a larger market share. Additionally, efforts to streamline operations and focus on high-margin products are expected to improve profitability. The company’s success in these areas will be crucial for a potential turnaround.
The stock is now down 23% in the last year, but it too has risen 4% in the last month. So with more earnings on deck, it could be time not just to watch the stock, but buy it. Especially with a dividend yield at 4.9%!
Time to buy?
Investing in underperforming stocks like FM, MG, and CTC.A carries significant risk but also potential reward. First Quantum Minerals shows promise with its expansion projects and expected improvements in production efficiency. Magna International’s pivot to the EV market could drive future growth, and Canadian Tire’s digital transformation might revive its fortunes.
Potential investors should consider their risk tolerance and investment horizon. Thoroughly analyzing each company’s strategic initiatives and keeping an eye on market conditions will be essential. While these stocks may currently be undervalued, their success hinges on effectively executing their respective turnaround plans.
