The TSX hit an all-time high as the US Fed rate cuts added to the optimism that loans will soon become less overbearing. In this bullish market momentum, when some growth stocks have already peaked, some stocks are just gaining momentum.
Source: Getty Images
Three best stocks to buy with $500 right now
The best time to buy a stock is in the early stages of recovery. As the stock market has set the stage for recovery, it is time to buy these stocks before they peak.
SmartCentres REIT
The real estate sector is one of the key beneficiaries of interest rate cuts. The sector suffered from weak demand as high interest rates had made mortgages unaffordable. SmartCentres REIT (TSX:SRU.UN) was hit by the falling fair market value of properties, slowing sales of condos and townhomes, and high-interest expenses. Its dividend payout ratio even surpassed 100% of the operating cash flow. The interest rate cuts will bring two-fold relief to the REIT. Firstly, its interest expense will be reduced, and the sales momentum will pick up with mortgages becoming affordable.
Property prices could revive and drive the unit price of SmartCentres REIT, which fell 33% during the high-interest rate environment. The REIT’s unit price has jumped 17% since June when the first interest rate cut was announced by the Bank of Canada. The recovery rally has just begun. The REIT has the potential to recover to the pre-pandemic level of $35, representing a 30% upside. It is unlikely to cut distributions as it didn’t do so even during the 2009 Financial Crisis, and it wants to maintain that reputation.
Investing $200 in the REIT now can help you lock in a 6.9% annual yield and 30% capital appreciation over the next two years.
Magna stock
Now is a good time to buy Magna International (TSX:MG) stock as it trades near its four-year low amid uncertainty around automotive demand. High inflation and interest rates barely helped Canadians afford groceries and pushed discretionary spending to a later date. Despite remarkable growth in revenue (13%) and earnings per share (108%) in 2023, the stock did not show any excitement as these were pending sales from the long wait times caused by the 2022 semiconductor shortage.
With semiconductor supplies in check, production capacity enough to meet all new demand, and easing of interest rates, car sales could gradually pick up. I won’t expect the uptick immediately as interest rates take time to sink in and impact the industries they have affected.
I am confident about Magna’s recovery as its resilient business model helped it stay profitable and grow dividends in one of the automotive sector’s toughest years. A recovery is due for this auto components maker, and when the stock recovers, its share price could grow 80% to over $100.
Hive stock
Hive Digital Technologies (TSXV:HIVE) stock tends to do well in a bull market as investor optimism fuels Bitcoin prices. The company still earns a majority of its revenue from mining Bitcoin. While the halving event in April 2024 did slow the rewards, a bull market could revive Bitcoin prices and make its mined cryptocurrency more valuable. The stock has already jumped 22% from its September low. Delay no further and invest $100 in Hive as the stock could double your money in the short term.
And if you are in it for the long term, the stock could grow your money severalfold from its cloud business, which is seeing rapid growth.
