This Canadian Stock Is Down 35% and Nearly Perfect for Long-Term Investors

Nutrien (TSX:NTR) stock is down, but the value case is looking really strong.

Key Points
  • Oversold “free-fall” stocks can be worth buying only if you understand the business and the price is well below your estimate of intrinsic value, with incremental buying helping manage falling-knife risk.
  • Nutrien (NTR) looks like a bargain after a steep drop, offering a ~3.26% yield and dividend-growth appeal while trading around 11.1x forward earnings despite commodity and geopolitical volatility.

There’s really no “perfect” stock to buy at any given time, but for value seekers looking to get the absolute best deal when the market or a few stocks take a bit of a dive, I think that some of the misunderstood free-fallers might be worth checking out. Indeed, oversold conditions might entail jumping into the deep end and looking wrong in a big way after hitting the buy button.

Often, selling begets more selling, as concern turns into fear, as some herd-following investors look to sell just because most others are. It’s hard to catch a falling knife, and investors shouldn’t look to do it unless they love the business behind the stock and, far more important, the valuation, which ought to be well below one’s estimate of intrinsic value.

If there’s a great deal on your radar, and you’ve put in the homework, it’s my opinion that you could be looking at a great buy. To tame the negative momentum, though, perhaps buying incrementally over time could be the way to build a position without having to feel bad if a trade continues to go south after officially becoming a shareholder.

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Nutrien stock is looking like a bargain

In terms of a Canadian stock that’s deep into a bear market and perhaps closer to a “crash,” one name seems to stand out at a time like this.

Enter shares of Nutrien (TSX: NTR), a dominant fertilizer play that’s close to the top of my radar going into the prime of summer. The stock sports a nice 3.26% dividend yield right here. Not excessive, not lofty, but, at the same time, somewhat generous, given the rate picture and how far rates, especially on bank, energy, pipeline, and insurance stocks, have dipped in recent years. In any case, Nutrien’s dividend growth profile is what should excite investors more than just the upfront yield.

With higher hopes for an Iran peace deal, I think shares of NTR might be timely going into July. The stock has been nosediving, now off 22% from its 52-week high and close to 35% from its 2022 highs. Will those highs be eclipsed anytime soon? Probably not. But I do see the name as an incredible value, especially for those who want a well-supported payout with a strong likelihood of growth.

Too cheap for such a quality dividend payer

At 11.1 times forward price to earnings (P/E), the case for backing up the truck on the major agricultural fertilizer play makes a whole lot of sense, especially for those expecting some normalizing after the Strait of Hormuz starts flowing as it did before the Iran war began. Despite the geopolitical unknowns and the uncertainty behind commodity price moves, I find shares of NTR to be a terrific longer-term play for investors who have the patience to keep collecting while management looks to do its thing and weather the latest wave of storms.

Sure, NTR stock might look like an untimely falling knife, but I’m starting to think there might be a disconnect, especially when you consider the Middle East conflict-driven volatility, which could ease with time.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Nutrien. The Motley Fool has a disclosure policy.

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