There is always value to be found in the stock market, even when the broader market has a bullish trend. As of this writing, the S&P/TSX Composite Index, which is the benchmark for the Canadian stock market, is nearing new all-time highs. The index is up by almost 17% from its low on April 8, 2025.
Typically, savvier investors who can see through the noise of a market sell-off focus on investing when everyone else sells. What if I told you those investors still have opportunities to buy undervalued stocks even when the market is hitting new all-time highs?
Year to date, the TSX is up by 5.75%. However, the TSX still has plenty of stocks trailing behind the rest of the market. Today, I will discuss two of them to help you determine whether they might be good candidates to consider long-term winners or stocks to avoid like the plague in your self-directed portfolio.
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Air Canada
Air Canada (TSX:AC) is a battered and bruised giant in the Canadian airline industry. The $6.05 billion market-cap company is Canada’s flag-bearing and largest airline. The company operates domestic, U.S.-Canada transborder flights and several international routes worldwide. Air Canada was one of the top 20 largest airlines worldwide before COVID struck in 2019.
Since the pandemic, the stock has failed to recover to better valuations. Despite not operating any flights, AC stock faced considerable cash burn to maintain its fleet, resulting in massive debt for the company without a recovery through operational revenue.
Air Canada’s most recent earnings report for the first quarter of 2025 saw it report $5.2 billion in revenue. Slightly down from $5.23 billion in the same quarter last year, the airline still generated around $387 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The company continues to expand its capacity, and while it may take a long time, there seems to be a recovery on the horizon.
Suncor Energy
Suncor Energy (TSX:SU) is another battered stock but in an entirely different industry. The $61.02 billion market-cap firm based in Calgary is an integrated energy company. It has operations that include oil sands development, production and upgrading, petroleum refining, offshore oil and gas operations, and wholesale distribution networks to retail the end product directly to consumers. The company is also advancing its transition into a lower-emission future.
The company trades at roughly 10.29 times trailing earnings, indicating that it might be undervalued right now. As of this writing, Suncor stock trades for $49.71 per share and distributes $0.57 per share each quarter to its shareholders, reflecting a 4.59% annualized dividend yield. It can be a good investment to consider for locking in high-yielding dividends and long-term capital gains.
Foolish takeaway
For most investors, investing when the market is going downward does not make sense. Why invest in a bear market when there’s nothing but losses everywhere? Smarter investors know how to use those downturns as opportunities to invest in undervalued stocks at a bargain. Despite what some investors might think, there still are opportunities during upticks to invest in bargains.
Suncor stock and Air Canada stock might seem very risky investments, and that’s because they are. However, the potential to recover to better valuations in the long run is there. If you have a well-balanced portfolio and a higher risk tolerance, these two might be good bets to pay off a few years down the line.
