2 of the Best TSX Stocks to Buy Before They Start to Recover

These two ultra-cheap TSX stocks are each unbelievably cheap, making them two of the best investments to buy now.

Daniel Da Costa

Author Bio Daniel joined The Motley Fool Canada in 2019 and brings experience in banking, investing, and financial analysis. Growing up as the son of a proprietary stock trader and educator, he developed an early interest in financial markets and a passion for helping Canadians improve their financial well-being. His work spans investment research, economic analysis, and econometric modelling, with a focus on understanding the broader forces that influence businesses, markets, and the economy. As an investor, Daniel looks for high-quality businesses with long-term growth potential, reliable income, and attractive valuations. Outside of finance, Daniel enjoys spending time with his family, playing hockey, running, and sailing. Areas of Expertise Investment research, economic analysis, econometric modelling, banking, financial analysis, business fundamentals, long-term investing, dividend investing, and company valuation. Favorite Investment Quote "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." — Warren Buffett

Published December 31, 2024 10:00 am EST

When it comes to investing, timing is everything. The ability to identify high-quality stocks trading at a discount can be one of the most effective strategies to maximize long-term returns. That’s why finding opportunities to buy some of the best TSX stocks before they begin to recover is so crucial.

Currently, plenty of top TSX stocks are undervalued due to market conditions, offering savvy investors the chance to lock in exceptional value. However, as with any investment, it’s essential to focus on companies with solid fundamentals and significant recovery potential.

So, with that in mind, here are two of the best TSX stocks to buy now before they start to recover.

a person looks out a window into a cityscape — Image source: Getty Images

A top TSX gold stock to buy while it’s ultra-cheap

Gold prices often drive sentiment toward mining stocks, and recent volatility in the commodity markets has created attractive opportunities for investors. One of the best value plays in the sector is B2Gold (TSX: BTO), a leading low-cost gold producer.

Despite being one of the lowest-cost producers you can buy and the fact that gold prices have been rallying significantly in recent months, B2Gold’s share price has been under pressure lately, largely due to temporary strikes at some of its mines. However, B2Gold remains a standout investment for several reasons.

First, its robust portfolio of mining assets, including its flagship Fekola mine in Mali, has the potential to generate significant cash flow. This reliability allows B2Gold to maintain one of the highest dividend yields in the gold mining sector, currently hovering around 6.3%. Therefore, it’s certainly one of the best TSX stocks for income-focused investors to buy now.

Additionally, B2Gold has been proactive in expanding its operations. The company’s exploration efforts and potential acquisitions provide a clear runway for growth, particularly as gold prices continue to increase. Furthermore, from a valuation perspective, B2Gold trades at a forward price-to-earnings (P/E) ratio of just 7.3 times, well below its five-year average of 10.8 times.

Therefore, whether you’re a passive income seeker or value investor, it’s clear that B2Gold is one of the best TSX stocks to buy before it starts to recover.

A defensive REIT with significant upside

Unlike the price of gold, which has seen a significant rally throughout 2024, Real estate stocks have faced headwinds this year due to higher interest rates and broader economic uncertainty. However, these conditions have also created opportunities to invest in high-quality real estate stocks while they trade at a discount. One standout opportunity is Canadian Apartment Properties REIT (TSX: CAR.UN).

CAPREIT is the largest residential real estate investment trust (REIT) in Canada, with a diverse portfolio of rental properties across the country. Despite its strong fundamentals, the stock has struggled due to concerns over higher interest rates impacting its cost of capital. In fact, currently, CAPREIT is trading at the bottom of its 52-week range.

Yet, even in the face of these challenges, CAPREIT continues to perform well operationally, which is why it’s one of the best stocks to buy before it recovers.

Plus, the demand for rental housing remains robust, driven by Canada’s strong population growth and record levels of immigration. This tailwind positions CAPREIT to continue growing its rental income steadily, even in a high-interest-rate environment.

Moreover, CAPREIT’s management has been focused on optimizing its portfolio, selling non-core assets and using the proceeds to strengthen its balance sheet. This not only makes CAPREIT a more reliable investment, but it should also make its operations more efficient and improve margins.

Currently, CAPREIT trades at a significant discount to its net asset value (NAV), offering investors an excellent opportunity to buy shares at a bargain. This time last year, CAPREIT was trading at 0.92 times its NAV. Today, it’s trading at just 0.76 times its NAV.

Additionally, its dividend yield has climbed to more than 3.5%, providing investors with reliable income while waiting for the stock to recover.

Therefore, considering its reliability, long-term potential and significant discount it offers today, there’s no question that CAPREIT is one of the best TSX stocks to buy now.