A prolonged U.S.-Iran war is developing, yet North American stock markets are displaying remarkable resiliency. The Toronto Stock Exchange, in particular, benefits from oil price shocks, supported by strong corporate earnings and defensive sectors. As of mid-May, the TSX is up 6.7% year-to-date, with 7 of the 11 primary sectors posting positive returns.
Two Canadian stocks stand out right now as strong buy candidates. Athabasca Oil (TSX:ATH) and Magellan Aerospace (TSX:MAL) are primed to surge through the rest of 2026 due to their powerful underlying fundamental catalysts. Both could deliver exceptional gains by year-end.
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High energy
Global energy supply anxieties continue to weigh on investors’ sentiment. Because of rising oil prices, Athabasca Oil has emerged as a high-octane energy stock. At $12.41 per share, ATH is up 76.5% year-to-date following a 43.8% three-month surge. The total three-year return is 254.7%, representing a compound annual growth rate (CAGR) of 52.5%.
The $5.6 billion energy company operates in Alberta’s Western Canadian Sedimentary Basin and develops thermal and light-oil assets. Its primary strategy is to maximize shareholder returns in high-margin projects and generate free cash flow (FCF) going forward. The low-decline thermal assets have an 85-year reserve life.
Duvernay Energy, a private subsidiary of Athabasca Oil (with a 70% ownership stake), produces light oil and liquids-rich natural gas from unconventional reservoirs. Growth in the Kaybob Duvernay is self-funded and has flexible development potential.
Athabasca Oil has built-in sustaining capital and a growth advantage through its long-life low-decline assets. Furthermore, the thermal oil assets have a sustaining break-even of $US45 per barrel WTI and a low operating break-even of US$40 per barrel WTI. The current price of Crude Oil WTI futures is US$101.02.
Adjusted funds flow in Q1 2026 reached $128 million. The company forecast $550 to $575 million this year, reflecting higher oil prices. Athabasca Oil expects the operational momentum to carry into 2027 and profitability to scale along with the significant increase in both Adjusted funds flow and FCF.
Predictable long-term growth
Magellan Aerospace is a compelling buying opportunity. The $1.5 billion global enterprise serves the aerospace industry, supplying aeroengines, aerostructures, rockets, and other components. MAL has advanced 34.3% over the last three months, resulting in a market-beating 45.2% year-to-date return. At $26.84 per share, the stock pays a modest 0.75% dividend.
In Q1 2026, revenue and net income increased 9.3% and 52.8% to $285.1 million and $16.5 million, respectively, compared to Q1 2025. Converting foreign operations from US dollars and British pounds to Canadian dollars affects revenue and net income.
Magellan expects sustained growth in the Defence Aerospace market in 2026 and beyond, driven by geopolitical tensions. The recently signed Teeming Agreement with TKMS for the Canadian Patrol Submarine Project (CPSP) will expand its defence footprint. The significant commercial aerospace backlog is its margin of safety.
Superior returns
Athabasca Oil has captured the commodity upside while providing a hedge against volatility. Magellan Aerospace sees multi-year growth in the defence market as global defence spending and demand for modern warfare technology grows. The stocks are likely to sustain their momentum and soar even higher.
