With Canadian stocks up 16.7% in 2024, it can feel difficult to find stocks that are attractively priced. However, there are opportunities out there. To succeed with these stocks, you need to be a little contrarian and have an investment horizon beyond a year (and preferably five years or more).
These stocks might have some near-term issues/concerns, but it also means you can buy them at attractive valuations. Here are three contrarian Canadian stocks to buy right now.
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An industrial stock that could soar when the economy picks up
TFI International (TSX:TFII) just came out with third-quarter results. They were less than stellar. TFI missed most analyst estimates and even reduced its 2024 guidance.
The North American freight recession has only gotten worse (not better as anticipated). It doesn’t help that its less-than-truckload division in the U.S. is significantly underperforming expectations. Management has been promising a turnaround, but that has yet to materialize.
Fortunately, weakness in the stock presents an opportunity. The company has a great long-term record of value creation. Its stock is up 343% in the past five years.
Despite a tough business environment, this Canadian stock is generating a lot of excess cash. That provides a lot of optionality for more acquisitions, share buybacks, and dividend increases. The long-term outlook looks very promising despite the near-term headwinds.
A Canadian financial stock with more room to compound returns
goeasy (TSX:GSY) is another Canadian stock that has declined recently. Its stock is down 7% since it announced preliminary third-quarter results that were not as good as analysts hoped.
The yield on consumer loans was down sequentially from previous quarters. That had some analysts concerned about a weakening economic environment.
However, it was not really a step away from what management signalled previously. Given a weakening economic environment, goeasy has tightened its underwriting policy and focused on a higher quality/lower yielding consumer in the non-prime space.
Consumer demand for its products remains strong. However, it is focusing on lending to its highest-quality consumers right now.
goeasy has one of the highest returns on equity in the Canadian financial sector. The recent financing means goeasy has the capital required to fund its double-digit growth plan.
With a 2.7% yield and a high single-digit earnings multiple, this Canadian stock looks like an attractive buy right now.
A top Canadian retail stock with long-term catalysts
Alimentation Couche-Tard (TSX:ATD) stock is another long-term compounder that is seeing a near-term pullback. This Canadian stock is down nearly 14% over the past three months.
Like the stocks above, it has not been immune to a weakening global economy. Consumers have pulled back discretionary spending. That is impacting demand for Couche-Tard’s higher-margin convenience products (like cigarettes, vapes, premium alcohol, and higher-cost food products).
Couche-Tard announced a bid to acquire the Japanese-controlled 7-Eleven convenience chain. It would be a huge acquisition. 7-Eleven is much larger than Couche-Tard, but it has underperformed for several years. It trades at a discount to Couche-Tard’s stock.
This could be a once-in-a-lifetime acquisition opportunity. Couche-Tard is a best-in-class industry operator. It has been an expert acquirer of convenience chains. Its business generates a lot of spare cash. If any company can turn 7-Eleven’s prospects around, it is Couche-Tard.
If the deal doesn’t happen, the acquisition market has significantly improved, and Couche-Tard could still have plenty of tuck-in acquisition opportunities. Despite the near-term business weakness, now could be the ideal time to add this long-term compounding stock.
