A market trading near record highs can still hide a clearance aisle. Right now, two profitable Canadian royalty stocks carry 14-day relative strength index (RSI) readings below 30, a level that suggests investors may have pushed the selling a little too far.
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How to use RSI
That doesn’t automatically make either stock cheap. The RSI measures recent price momentum rather than business value, so a weak company can remain oversold while continuing its unfortunate journey downward.
I treat the RSI as an entry-point clue, not permission to stop researching. A reading below 30 can signal heavy selling, but earnings, cash flow, debt, and valuation determine whether a rebound has any lasting fuel.
This approach can prove especially useful during a stock market correction, when fear pulls healthy businesses down beside the troubled ones. Today, it leads me toward OR Royalties (TSX:OR) and Labrador Iron Ore Royalty (TSX:LIF).
OR Royalties
OR Royalties doesn’t operate mines. Instead, it owns royalties and streams that give it a share of production or revenue from properties run by other mining companies, allowing OR to benefit from rising output without paying the full cost of building and operating each mine.
Its portfolio includes more than 195 royalties, streams, and offtake agreements, anchored by a major royalty on Agnico Eagle’s Canadian Malartic complex. That collection produced record first-quarter royalty and stream revenue of $102.8 million, while operating cash flow climbed 56% to $71.9 million.
The business kept 96.8% of its revenue after direct costs, showing why royalty companies can generate such attractive margins. Management also expects attributable production to rise from 80,000 to 90,000 gold-equivalent ounces in 2026 to between 110,000 and 125,000 by 2030.
OR’s RSI now sits at 29.5, with the shares near $40 and trading around 21 times trailing earnings. That isn’t bargain-bin pricing, but the growing production outlook and record cash generation make the recent weakness far more interesting.
LIF
Investors wanting a cheaper valuation and more income may prefer LIF stock. The company receives royalty revenue from the Iron Ore Company of Canada and owns an equity interest in the producer, giving shareholders direct exposure to iron ore sales without operating the mine itself.
First-quarter royalty revenue reached $35.4 million, remaining comparable with the prior year despite production problems. Adjusted cash flow held steady at $0.31 per share, even as truck availability and machinery failures reduced concentrate and pellet production.
Those operational setbacks help explain the current opportunity. LIF stock recently held an RSI of 29.5, while the shares traded near $26 at roughly 18 times trailing earnings with a 5.1% trailing dividend yield.
The dividend can change alongside commodity prices and cash flow, so investors shouldn’t treat that yield like guaranteed interest. Still, improved equipment reliability could lift production while investors collect income and wait for the recovery.
Foolish takeaway
There are points to consider before diving in. OR Royalties depends on mine operators completing projects and meeting production targets, while weaker gold prices could reduce cash flow. LIF stock faces iron ore pricing, steel demand, operational reliability, and variable-dividend risk.
Those uncertainties make gradual purchases sensible when buying stocks in Canada. RSI readings can change quickly, so I’d build each position over time rather than trying to catch the exact bottom.
Yet all considered OR Royalties offers record cash flow and a substantial production-growth runway, while LIF stock brings a lower valuation and a larger income stream. The RSI readings show where sentiment sits today, but improving operations and growing cash flow could determine how rewarding these unpopular prices become.
