With the TSX Index pulling back around 4% for December, investors may be wondering if the so-called Santa slump is an opportunity to buy or a red flag to sell before a full correction (that’s a 10% drop) has a chance to hit. With a weak loonie and stiff tariffs that may very well nudge the Canadian economy into an economic recession, there’s plenty of uncertainty and risk on the table.
Despite this, I still view Canadian stocks as magnificent buys for the long haul. With the unfavourable loonie, perhaps U.S. investors looking for deeper value and heightened yields may wish to pick up a Canadian stock ahead of 2025.
In this piece, we’ll look at two smart TSX stocks that I think look unsustainably undervalued. And while $500 may not make sense to invest if your commissions are hefty (let’s say more than $5 per trade), I do think that new investors on commission-free trading platforms or those who have a few free trades left to use up may wish to consider the following two names as the TSX Index encounters a “half correction” of sorts to end the year.
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Cameco
Cameco (TSX:CCO) is a Canadian uranium producer worth keeping tabs on as it looks to extend its run going into a new year. Shares of the well-run miner are fresh off a correction, now down close to 12% from recent all-time highs.
Indeed, the latest round of earnings results may have disappointed mildly. However, if you’re looking to play the continued rise of nuclear energy, I’d be inclined to start viewing the latest slip as a chance to buy. Indeed, the stock still isn’t what most would consider cheap at just shy of 52 times forward price-to-earnings (P/E).
That said, top-tier uranium producers are hard to come by. And as the big U.S. hyperscalers look to nuclear power options to fuel the AI infrastructure of the future, I wouldn’t be surprised if uranium prices were to heat up going into the latter half of this decade. Either way, Cameco is a great way to play the supply side of the equation. Though it’d be best to wait for a steeper pullback, I’m not against starting a very small (let’s say $500) position here.
Choice Properties REIT
Choice Properties REIT (TSX:CHP.UN) shares have corrected more than 12% off 52-week highs of $15 and change. Though Choice isn’t exactly the most exciting or bountiful REIT out there, I do like it for its stability. The REIT stands behind one of the most dominant grocery stores in the country – Loblaw Companies (TSX:L), which is the top tenant and unitholder.
If you seek a defensive distribution that can fare in all sorts of economic conditions, look no further than the one offered by CHP.UN. With a 5.7% distribution yield, income investors will get a lot more cash coming their way than with bonds, especially after recent Bank of Canada rate cuts.
Sure, a 3-4% yield isn’t terrible if inflation’s close to 2%. However, for investors who need a bit more income, CHP.UN shares are a great, sleep-easy way to give yourself a raise without having to keep you up at night. Of course, REITs can be a choppy ride as the Bank of Canada contemplates its next move. Regardless, if you’re in it for the long run, I’d view the latest dip as a Boxing Day bargain of sorts.
