One of the best ways to maximize long-term returns is to buy high-quality TSX stocks when they’re trading at a discount.
High-quality stocks with long-term potential can fall due to temporary challenges. However, investors who step in at the right time can set themselves up for significant gains as these businesses recover.
Of course, not every stock trading at a low price is worth buying. Some businesses face structural problems that make a recovery unlikely, and others may take years to bounce back.
So, the key for investors is to find the top-notch companies that are only trading undervalued because of the short-term headwinds they’re facing but still have strong long-term potential.
And in the current uncertain economic environment, there are several high-quality TSX stocks to buy now while they are temporarily undervalued.
Whether it’s real estate recovering from the impact of higher interest rates or the logistics sector regaining momentum as global shipping demand improves, there are plenty of stocks across the board to consider adding to your portfolio today.
So, with that in mind, if you’ve got some cash that you’re looking to invest in this environment, here are two ultra-cheap TSX stocks you’ll want to buy now before they eventually recover.
Source: Getty Images
An ultra-cheap residential real estate stock
Many real estate stocks have been trading off their highs over the last year, but one of the best and cheapest on the TSX has to be InterRent REIT (TSX:IIP.UN).
InterRent and many other high-quality REITs like it are trading ultra-cheap these days in large part due to the fact that the real estate market has faced significant challenges over the past few years.
Rising interest rates have weighed on property valuations, impacted margins, and increased financing costs, slowing down the pace of growth for many of these high-quality stocks.
These impacts have naturally led to a lower stock price for InterRent; however, much of its long-term potential remains, which is why it’s one of the best TSX stocks to buy today.
Furthermore, in addition to the long-term growth potential it continues to have, interest rates have now begun to decline, which means InterRent could start to see a significant rally in the near term.
Furthermore, another catalyst that could see InterRent continue to rally in the near term is the 9% position that the activist hedge fund Anson Funds Management has recently built, becoming the REIT’s largest shareholder.
Therefore, with interest rates now on the decline and InterRent trading at a forward price-to-funds-from-operations ratio of just 17.5 times, well below its five-year average of 23.9 times, there’s no question that InterRent is one of the best TSX stocks to buy now while it’s still undervalued.
A top TSX stock to buy while it’s ultra-cheap
In addition to InterRent, another top TSX stock you’ll want to buy before it starts to recover is Cargojet (TSX:CJT).
Cargojet is another high-quality stock facing short-term headwinds that have caused it to fall out of favour.
As Canada’s leading overnight air cargo provider, Cargojet plays a critical role in the logistics industry, transporting time-sensitive shipments across the country. However, the stock has faced pressure recently, partly due to a slowdown in e-commerce growth and partly due to the uncertainty about how tariffs will impact cross-border trade.
However, although these challenges have impacted Cargojet’s near-term financials, its long-term investment potential remains intact. The company continues to hold a dominant position in the Canadian overnight air freight market, with long-term contracts that provide stable revenue.
Additionally, Cargojet has been expanding its international operations, increasing its presence in global cargo markets. This strategy not only diversifies its revenue streams but also positions it for future growth as global trade volumes recover.
Therefore, while Cargojet trades unbelievably cheaply, it’s easily one of the best TSX stocks to buy right now. For example, Cargojet is currently trading at a forward enterprise value to earnings before interest, taxes, depreciation, and amortization ratio of just 5.8 times, well below its five-year average of 9.95 times.
So, while you have the opportunity to buy one of the best long-term growth stocks on the TSX at such an attractive valuation, you’ll want to take full advantage.
