TFSA Investors: 2 Value Stocks With Potential for a Huge Q4 Rebound

Parkland Fuel (TSX:PKI) stock looks way too cheap to ignore after its latest bearish descent.

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Canadian investors looking to put their 2024 TFSA (Tax-Free Savings Account) contribution to work have many options as we head into the fourth and final quarter of this year. Undoubtedly, it’s been a pretty solid year for markets thus far. And though there’s been no shortage of market volatility (especially in the corners of the semiconductor scene), I still think investors should be ready to keep rolling forward.

With the TSX Index close to a new high, investors should look to some of the less-appreciated, cheaper names if they’re looking to take a sizeable stake in a firm for the next four to six years. Undoubtedly, falling rates and the artificial intelligence (AI) boom make for a rather interesting macro climate — one that may still be discounted by investors.

Of course, economies tend to take a heavy shot to the chin whenever the rate hikes come in fast. While things could be different this time as inflation tanks while central banks do their best to preserve the economy, one must always concentrate on evaluating individual names. Paying too much attention to the macro forecasts can undoubtedly have its drawbacks.

For one, almost everybody on Wall or Bay Street is already fully aware of the road ahead. By the time new bits of economic data come to light, the stock markets (and bond markets) have likely already reacted, giving you little to no edge over most other market participants. The good news is you don’t need to be a seasoned economist to do incredible things in markets over the long term. It would be best to analyze companies in industries or sectors you’re familiar with.

Sticking with what you know how to value

So, if you don’t know how to evaluate semiconductors or if you’d rather bet big on a railway, you have the option to take a rain check on the semis as you place bets on what you do know how to value. Arguably, it’s a better idea to bet on what you know than to be forced into a sector you cannot fully understand.

Though the AI boom could mint many millionaires, it’s unclear just how hefty the premium is on the shares of today’s hottest firms. The hefty multiples call for substantial medium-term growth. And if there’s an economic stumble along the way, you can bet that Mr. Market will correct valuations in a relatively quick and painful manner.

In this piece, we’ll look at one TFSA-worthy value stock that may be worth stashing away for years. Enter shares of Parkland Fuel (TSX:PKI).

Parkland Fuel: Convenience at a nice discount

Parkland Fuel stock has been sinking lower in a rather smooth fashion since peaking in January 2024. The stock has now lost close to 28% of its value from those 52-week highs. Though the negative momentum doesn’t seem to be slowing down, I think it’s worthwhile to consider picking up a few shares for your TFSA.

The stock trades for a mere 16.15 times trailing price to earnings (P/E) and has a generous 4% dividend yield. Additionally, the $5.9 billion firm could be a worthy takeover target in the convenience retailing space.

Now, Parkland has its fair share of issues. The company has work to do on operating efficiencies to better weather any industry headwinds. As management takes steps to drive organic growth and chip away at debt rather than hunting down merger and acquisition opportunities, I think the stock could make a strong rebound candidate in the fourth quarter of 2024. That said, it’s best to stash away this name in a TFSA for at least the next five years.

Created with Highcharts 11.4.3Parkland PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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