When stocks across the board are declining and trading at undervalued prices, and when market sentiment is negative, it can feel like the worst time to invest. However, in reality, it’s often the best time to put your hard-earned capital to work.
As stocks decline, that’s typically when the most attractive long-term opportunities are hiding in plain sight. The key is to focus on high-quality businesses – companies with strong fundamentals, reliable cash flow, and long runways of growth – and buy them when they’re trading below their true value.
That’s what makes the current environment so compelling. There’s no shortage of stocks that have pulled back significantly, even though their long-term outlook remains strong. And if you have room in your TFSA, it’s a great time to put that capital to work.
You don’t need to try to time the exact bottom, you just need to find great businesses trading at attractive prices and be willing to hold them for years.
That’s how real wealth is built. And when you’re doing it inside a TFSA, those gains can grow tax-free for years. Over time, the combination of high-quality stocks, a long investment horizon, and compound growth in a TFSA can lead to significant returns for patient and disciplined investors.
So, if you’ve got $7,000 sitting in your TFSA and want to put it to work, here are five undervalued stocks worth buying today and holding for years to come.
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Three undervalued recovery stocks to buy in your TFSA
If you’re looking for ultra-cheap Canadian stocks to buy now, three of the best to consider are Cargojet (TSX: CJT), Air Canada (TSX: AC) and Cineplex (TSX: CGX).
All three stocks are ultra-cheap and facing temporary headwinds, causing them to trade at significantly undervalued levels.
For example, Cargojet is down more than 35% from its 52-week high as economic uncertainty and a slowdown in consumption and ecommerce spending temporarily impact its business.
Though Cargojet is so well-positioned for the future in an industry with significant growth potential, it is trading at a forward price-to-earnings (P/E) ratio of 17.5 times, well below its five-year average of 27.6 times, showing why it’s easily one of the best undervalued stocks to buy in your TFSA today.
Meanwhile, both Air Canada and Cineplex are also facing temporary headwinds of their own. However, both also have dominant positions in their respective industries and the potential to recover significantly as economic conditions improve.
For example, Air Canada is currently trading nearly 30% off its 52-week high.
Furthermore, Cineplex has been undervalued since the pandemic. And even today, it’s still trading at a forward enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA) ratio of 7.6 times, which is significantly lower than its five-year average of 9.7 times.
Therefore, while these two recovery stocks are undervalued, they’re among some of the best stocks to buy for your TFSA today.
Two of the best long-term investments in Canada
In addition to those three recovery stocks, two more of the best long-term stocks to buy and hold in your TFSA are Brookfield Renewable Partners (TSX: BEP.UN) and Granite REIT (TSX: GRT.UN).
Not only is Brookfield trading roughly 20% off its 52-week high, but it’s also one of the largest and best-run stocks in an industry with massive long-term growth potential.
Green energy doesn’t just have years of potential to expand rapidly; it has decades of growth potential. And Brookfield is consistently leveraging its impressive management team and access to significant capital to allow it to build a global portfolio of diversified green energy projects.
In fact, in the last five years alone, its revenue has increased by over 97%. Furthermore, it offers a current yield of 5.9%. Therefore, while you can buy it undervalued, it’s one of the best stocks to add to your TFSA.
Meanwhile, Granite is one of the best REITs to buy and hold for the long haul. It has significant growth potential as an industrial REIT and pays an attractive dividend that is sustainable.
If you buy Granite today, not only is it trading nearly 20% off its 52-week high, but its dividend yield has also climbed to an impressive 4.9%.
So, if you’ve got cash in your TFSA, there’s no question Granite is one of the best undervalued stocks to buy right now.
