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Fellow Fools,

If the investing word-du-jour a few weeks ago was “DeepSpeak,” now the word on everyone’s lips is “tariffs.”

And of course investors have lots of questions about the tariff situation and how it will all play out, especially for the companies that my team at Stock Advisor Canada and I have recommended.

The problem is, we have no idea.

Nobody does — not even the people who are directly involved in playing the tariff game.

Earlier this month, we weathered a single day when tariffs were a go at market open and no longer by the time North American markets closed. But if that day taught us anything, it’s that we might be in for a four-year stretch where a fly-by-the-seat-of-the-pants policy is in play.

Applying this to the stock market, my read is that we’d better mentally prepare for volatility. Throw in the fact that the U.S. market is at the upper end of its historical valuation range and is rather top-heavy, and the table is set for market schisms.

The good news is that market volatility equals opportunity, Fools! It’s just a matter of preparation.

Part of the preparation is having companies that you’re familiar with and ready to buy when the opportunity presents itself. Maybe it’s today. Maybe it’s at some point in the future. And Stock Advisor Canada is very much here to help with that pursuit.

Here, we’re highlighting five stocks that we think you can at least begin building positions in — right now.

Emphasis was added because cautious, Foolish investors know to build toward a full position. This is in contrast to a more binary — and I fear, more oft-followed — practice of buying a full position in one fell swoop.

Bottom line: We’re of the mind that each of these companies is well suited to navigate whatever is thrown its way in the years ahead and that buying some of each today is warranted at current prices.

Enjoy!

Foolishly yours,
Iain Butler, CFA
Advisor, Stock Advisor Canada

Brookfield Renewables (TSX:BEP.UN) provides a current dividend yield of ~6.8%, and that dividend will almost assuredly grow in the years ahead.

In addition, the business itself is likely to grow in the neighbourhood of 10% annually. Toss in a multiple that’s in line with the historical average, and there’s a strong case to be made that Brookfield Renewable investors are going to earn a ~15% annualized total return over the next five years. This means we’re looking at about a double over that period. Our bet is that’s better than what the market will provide.

Digging in a touch, there’s a lot simmering under the Brookfield Renewables hood. Capital deployment of $1.8 billion in 2024, net, was a record, and management anticipates more of the same in 2025. Demand for power seems headed in one direction, and there is plenty of appetite for the green variety that Brookfield Renewables serves.

Big tech is pushing on the demand side of the equation, and while BEP’s deal with Microsoft (NASDAQ: MSFT) made headlines, there’s likely more where that came from.

Policy shifts are omnipresent in the world of renewables, and it’s likely that’s what’s playing into our current opportunity. There will be more noise along these lines in the years ahead, but the long-term demand for energy isn’t likely to abate. For those able to tune out the noise, the aforementioned total return formula should ring approximately true.

The post Just Released: 5 Top Stocks to Buy in February [PREMIUM PICKS] appeared first on The Motley Fool Canada.

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• Canadian Renewable Energy Stocks: Hype or Historic Opportunity?
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• 2 Canadian Dividend Giants I’d Buy With Rates on Hold

Fool contributor Iain Butler has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Renewable Partners and Microsoft. The Motley Fool has a disclosure policy.

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As I said to members of Stock Advisor Canada earlier this month, market volatility these days is about as low as it gets. Generally speaking, stocks that were attractive buys in, say, January or March remain attractive today.

But if there’s a lean in this month’s collection of our five favourite stocks to buy in June, it is toward the energy sector, which has been unduly hit of late. It’s our opinion that opportunities in that corner of the market remain plentiful, and we’ve tried to reflect this dynamic in this month’s list.

Foolishly yours,
Iain Butler
Chief Investment Officer, Stock Advisor Canada

Parex Resources’ (TSX:PXT) stock price has taken a hit in recent weeks alongside many of its oil-producing peers.

The thing is, Parex looks highly attractive at today’s going rate for crude oil (~$82 for WTI).

Even if we assume $75 crude, Parex will generate between $590 and $660 million in funds flow from operations. Remove ~$410 million in capital expenditures (approximate annual budget), and you’re left with $180 to $250 million of free cash flow to use in the service of shareholders. About $115 million is taken by the dividend, but there’s still plenty of ammo to buy back stock or seek out other ways to provide an attractive return on capital.

Yet, the market has Parex trading for just 4 times earnings.

Something’s gotta give.

The share count is down to 102.2 million at last report from 141 million at the end of 2019, and we suspect that will continue lower from here. Plus, the stock offers an amply supported 7% dividend yield.

While the rest of the market is looking elsewhere, Parex is screaming from the hilltops that there’s an opportunity here. Listen up!

The post Just Released: 5 Top Stocks to Buy in June 2024 [PREMIUM PICKS] appeared first on The Motley Fool Canada.

More reading

• 2 TSX Stocks Priced Under $50 That Could Have Meaningful Room to Run
• How to Generate $150 in Passive Income With $30,000 in 3 Stocks
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• Have $2,000? These 2 Stocks Could Be Bargain Buys for 2026 and Beyond
• Looking for a 5.4% Average Yield? These 3 TSX Stocks Are Worth a Look

Fool contributor Iain Butler has no position in any of the stocks mentioned. The Motley Fool recommends Parex Resources. The Motley Fool has a disclosure policy.

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It used to be that receiving a dividend yield that represented anything near the long-term historical average annual return from investing in stocks was a rare find. If you did find a yield that high, you could be reasonably sure the dividend was at serious risk, and more often than not, you weren’t going to receive that payout for long.

However, there are quite a few examples of yields floating around in the market today in the 6-9% range and, barring some unusual development, are likely to stick around. Some of them might even grow a bit, as I suspect the current 7% yield at this featured stock will.

Foolishly yours,
Nate Parmelee
Senior analyst, Stock Advisor Canada

To be fair, the recent headlines about the communications industry aren’t great. That’s certainly weighing on Telus’s (TSX:T) share price. I also think there is a pretty good argument that, at this point, the sales opportunities for current technologies are close to saturated. But there will be new, faster wireless technology to sell in the future, and Telus generally ranks highly — or at least better than its competitors — on service with competitive pricing. So, this isn’t a business in decline.

Bears will say that Telus’s dividend is unsustainable because it’s so far beyond the company’s net income. This argument doesn’t hold any water for me, though. Dividends are paid with cash flow, and last year’s free cash flow amply covered the dividend. More importantly, capital spending at Telus is in decline now that its fibre network is built, which means higher free cash flow.  

In fact, I suspect Telus will raise its dividend this year. So, that 7% dividend yield that’s on offer now is likely to deliver a higher effective yield on today’s purchase price later this year. That is, of course, assuming the shares are bought while the share price is depressed.

The post Just Released: 5 Top Stocks to Buy in April 2024 [PREMIUM PICKS] appeared first on The Motley Fool Canada.

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• The Canadian Blue-Chip Stock Trading at Bargain Prices Right Now

Fool contributor Nate Parmelee has positions in Telus. The Motley Fool recommends Telus. The Motley Fool has a disclosure policy.

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The market’s attention right now is seemingly focused purely on buzzwords like “AI,” “the Magnificent Seven” and “crypto.”

To us, this means opportunity — but not where the masses are playing. It’s where they aren’t.

Once again, we find that a relative few are paying attention to the energy sector.

This means we think that you should be paying attention to the energy sector. Namely, this stock.

Foolishly yours,
Iain Butler, CFA
Advisor, Stock Advisor Canada

Parex Resources (TSX:PXT) explores for, develops, and produces onshore oil and natural gas in Colombia.

Why do I like it now?

In addition to Parex’s strong-as-usual results that were reported at the end of February, the company’s operations were hindered earlier this year by social protests that have now ended. The temporary shut-in will have an impact on Parex’s Q1’24 report, but in the grand scheme of things, will be easily forgotten. Meanwhile, the stock price has arguably lost about 20% of its value because of a situation that is no more.

Parex currently offers a cash-flow-supported dividend yield of 7.2% (remember, the higher the yield, the riskier the market thinks the stock is), and the far-too-low 3 times earnings multiple that it currently trades for suggests that a rather dire future awaits. But neither of these metrics are representative of the company’s performance. We think they’re far more a product of the market’s ignorance.

Said more succinctly, Parex shares are very attractive … right now.

The post Just Released: 5 Top Stocks to Buy in March 2024 [PREMIUM PICKS] appeared first on The Motley Fool Canada.

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• Have $2,000? These 2 Stocks Could Be Bargain Buys for 2026 and Beyond
• Looking for a 5.4% Average Yield? These 3 TSX Stocks Are Worth a Look

Fool contributor Iain Butler has no position in any of the stocks mentioned. The Motley Fool recommends Parex Resources. The Motley Fool has a disclosure policy.

My fellow Canadian investors,

I’ve never been more aware that … we need help.

You see, Morningstar recently published an article called “10 Most Popular Stocks in Canada in 2023.”

And frankly, my entire team of analysts at Motley Fool Canada was disheartened after reading it.

The list included five Canadian banks, two telecoms, one pipeline company, one life insurance company, and one technology company by the name of “Apple.” Ever heard of it?

All household names. All big, boring … and, I suppose, beautiful companies. At least in the eyes of most Canadian investors.

No Constellation Software (TSX: CSU), a company my team would argue is the best in the land. (The stock is up 302% since we recommended it in our flagship service, Stock Advisor Canada. The TSX return in the same time period? 52%.)

No Brookfield-anything – a collection of companies that offer global intrigue.

No energy representation.

No small caps.

No nothing outside of what you might find in the top 10 holdings of any ol’ generic Canadian index fund. An index that hasn’t exactly blown the barn doors off when it comes to providing a return we’d deem satisfactory over the past, oh, decade.

Meet The Motley Fool Canada

My name is Iain Butler, and I’m the Chief Investment Officer here at Motley Fool Canada. I’m not saying that we’ve never recommended any of the stocks on Morningstar’s list. There’s definitely some overlap.

But if Morningstar’s list is truly indicative of the tunnel vision that most Canadian investors seem to have, then my goodness … we are here to open your eyes to a world of possibility that you might think only exists for “other” investors.

My Foolish friend, the world of investing is your oyster! And while I’ve no issue with Canadian bank stocks, for instance, they aren’t the be-all-and-end-all that they might have been earlier in their lifecycles.

Rather than going back to the well for bank stocks, Stock Advisor Canada regularly reveals timely Canadian and U.S. stock recommendations to our growing group of members. We do this every month.

And over the past decade, our average returns have outperformed the TSX by 30 percentage points.

How to Start Investing With Stock Advisor Canada

Admittedly, you might find joining an investment advisory service a bit intimidating. 

To that I say, fear not.

For one, if you give Stock Advisor Canada a try and decide it’s not for you, that’s fine. Simply cancel within 30 days and you’ll receive every penny of your membership fee back.

More importantly, though, we’ve just released our list of Starter Stocks for 2024 – stocks we think every Canadian should own this year.

Ten companies. Five Canadian. Five U.S.

Exactly zero appear in the aforementioned “most popular” list.

Taken together, these stocks provide a wonderful way to begin investing in promising businesses that span industries and geographies the world over. They are a blueprint for success with Stock Advisor Canada: You don’t ever have to wonder where to start.

I usually leave these kinds of “sales-y” messages to my colleagues, but I was so taken aback by what’s popular among my fellow Canadian investors that I simply had to shout from the rooftops that there’s a better way.

Please join me. Join us. Become a Fool today!

Foolishly yours,
Iain Butler, CFA
Chief Investment Advisor, Motley Fool Canada

The post Can You Guess the 10 Most Popular Canadian Stocks? (If You Own Them, You Might Be Losing Out.) appeared first on The Motley Fool Canada.

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Fool contributor Iain Butler has no position in any of the stocks mentioned. The Motley Fool recommends Apple and Constellation Software. The Motley Fool has a disclosure policy. Curious about the stocks listed in the Morningstar article? They are TD Bank, Royal Bank of Canada, Enbridge, Bank of Nova Scotia, BCE, Apple, Telus, Bank of Montreal, CIBC, and Manulife Financial.

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North American markets remain mired in a funk, and many investors (including me) are wondering if the end is in sight. My team at Stock Advisor Canada and I love receiving questions about the market.

The thing is, many of the questions we get don’t have an answer from anyone — or at least anyone you should pay attention to.

These questions tend to follow along two lines:

1. Any question that starts with “when.” Unless it relates to a pre-announced date that’s widely known, we don’t know what the future holds. Asking “when” implies that we do. Sorry — we simply don’t!
2. The word that usually follows or is associated with “when” is “will.” Furthermore, both words are generally attached to a stock price. For instance, “When will stock XYZ go higher?” Or these days, “Will stock XYZ stop going down?”

“Will” implies predicting with certainty. The reality is, especially in the short term, stock prices are anything but certain. The same goes for company performance. Certainty is not possible when it comes to the future.

Many people in the financial industry tout their ability to “call” short-term stock price movements, but we highly suggest seeking out their track record of success before following along. Frankly, if someone does have this ability, they need not offer their services to the general public.

The best we can do at Stock Advisor Canada is to study businesses, find great companies with promising investment potential, and ride along in the market with you. Here are five we especially like this month.

Foolishly yours,
Iain Butler, CFA
Advisor, Stock Advisor Canada

By Tom Gardner: Airbnb’s (NASDAQ: ABNB) stock has certainly recovered from its late-2022 lows but is still down by about 26% from its 52-week high and is more than 10% below where it ended its first day as a publicly traded company in late 2020. This is in spite of the fact that Airbnb is much larger and more profitable. In fact, Airbnb’s 2022 revenue was about 150% greater than it was in 2020, and the company went from a $4.6 billion net loss to a $1.9 billion profit. Plus, all signs point to even stronger numbers in 2023.

Airbnb trades for about 9 times TTM sales, but you get what you pay for. This is a business with a 25% net margin over the past four quarters, 18% year-over-year revenue growth in an increasingly difficult economy, and a multi-trillion-dollar addressable market opportunity. 

If we were to ask you what Airbnb’s strongest growth period was, you might assume it was around the time of the COVID-19 pent-up demand surge that occurred in the travel industry in 2021 and 2022. But in some ways, the platform’s most impressive growth is happening right now. In the second quarter of 2023, Airbnb added more net active listings to its platform than any other quarter in its history. 

One of the reasons the company continues to grow so impressively is that management is constantly finding ways to improve the platform, make it appealing to hosts, and add new capabilities. Not long ago, Airbnb added the ability for renters (not just homeowners) to list their properties, just to give one example. The company recently rolled out new pricing tools for hosts, as well as certain fee changes to encourage more long-term stays. 

Regulatory uncertainty is one of the biggest question marks Airbnb investors should keep in mind; however, the company is in a category all by itself and is a tremendously profitable business that still has a large market opportunity ahead.

The post Just Released: 5 Top Stocks to Buy in November 2023 [PREMIUM PICKS] appeared first on The Motley Fool Canada.

More reading

• 2 TSX Stocks Priced Under $50 That Could Have Meaningful Room to Run
• How to Generate $150 in Passive Income With $30,000 in 3 Stocks
• 2 Canadian Stocks That Just Raised Their Payouts Again
• Have $2,000? These 2 Stocks Could Be Bargain Buys for 2026 and Beyond
• Looking for a 5.4% Average Yield? These 3 TSX Stocks Are Worth a Look

Fool contributor Iain Butler has no position in any of the stocks mentioned. The Motley Fool recommends Airbnb. The Motley Fool has a disclosure policy.

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With an ugly September now in the books and a continuation of the market ugliness into October, all of a sudden, we’re in the midst of a market “schism.”

This time around, the blame appears to live squarely on the shoulders of spiking longer-term bond yields that are increasingly making the cost of money across the yield curve more expensive — all while simultaneously increasing the rate at which the cash flows our favourite companies generate are discounted at, which, in turn, negatively impacts their value.

The U.S. 10-year Treasury bond yield has jumped from ~4.2% at the beginning of September to ~4.7% today — a level not experienced in years. And, Fools, this move, and more so the potential continuation of this move, has vast swaths of market participants shaking in their loafers.

Not us, Fools. Not us!

After several months of not really finding much of interest in terms of new investment ideas, especially from the Canadian market, my colleagues and I at Stock Advisor Canada are increasingly intrigued by what’s available. A pool of opportunity has begun to form … and it’s growing by the day.

Here, though, we’re coming back to stocks we’ve already recommended to call out five that we think are worth investing new capital into right now. It was tough to cap this list at five.

Foolishly yours,
Iain Butler, CFA
Advisor, Stock Advisor Canada

By Jim Gillies: The big-picture investing story for MTY Food Group (TSX: MTY) has been the company’s return to deal-making following the pandemic reopening. MTY has always been a company that grows through acquisition, and it announced and followed through with a couple of doozies in the past year. First BBQ Holdings (parent company of Famous Dave’s, Barrio Queen, and Granite City), and then Wetzel’s Pretzels. Combined, these large deals (plus a much smaller one — Sauce Pizza and Wine) added about $560 million of debt to MTY’s balance sheet over two quarters.

Fortunately, MTY had the “dry powder” to do so, having spent the pandemic directing its cash flows to debt repayment. After putting recent acquisitions on the company credit line, MTY has again turned its cash flows back to deleveraging, taking down about $56 million in the past two quarters.

Today, MTY has an annual EBITDA capacity in the $275 million to $300 million range. Over the last four quarters, “normalized” adjusted EBITDA (which strips out acquisition-related expenses) is $242.6 million, and that’s without full-year contributions from BBQ and Wetzel’s. The present share price reflects an 8.9-9.7 times enterprise value multiple on this EBITDA range, nicely below the up to 12 times we’ve suggested paying. It’s a great Canadian food stock going for a better-than-fair price today.

The post Just Released: 5 Top Stocks to Buy in October 2023 [PREMIUM PICKS] appeared first on The Motley Fool Canada.

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Fool contributor Jim Gillies has positions in MTY Food Group. The Motley Fool has positions in and recommends MTY Food Group. The Motley Fool has a disclosure policy.

This month, my investor colleagues and I are celebrating the 10th anniversary of Motley Fool Stock Advisor Canada by looking back at our track record and making some bold predictions about the future.

Stock Advisor Canada’s Returns

As for our track record, we’re immensely proud to be beating the TSX by almost 24 percentage points over that time, with our 56% average return trouncing the index’s 32% return.

How did we do it?

From the time we made our first stock recommendations 10 years ago, these Foolish investing principles have served as our guiding light:

• Buy businesses, not tickers.
• Be a lifetime investor.
• Time arbitrage. (taking advantage of the market’s short-term bias)
• Diversify.
• Fish where others aren’t.
• Check emotions at the door.
• Keep score.
• Be Foolish and have fun!

Top 10 TSX Stocks to Own for the Next Decade

With those Foolish investing principles firmly in mind, my team and I identified 10 companies – some based in Canada, some not – that we think have competitive dynamics that essentially allow them to play by their own rules. Those are the kinds of businesses that dominate their markets and end up rewarding investors time and again.

This little-known company is up 69% since we started following it in 2020, beating the TSX Composite Index by 33 percentage points. (That’s an annualized return of 19% versus the benchmark’s 11%.)

Never heard of ASML (NASDAQ: ASML)? Unless you work in the semiconductor industry, that’s not surprising. This is a highly specialized company focused on a niche technology that just happens to be the linchpin of a $400 billion-plus industry. Just about every investing buzzword you can think of — artificial intelligence stocks, machine vision, big data, self driving etc — is built on the back of microchips … and ASML dominates a crucial part of the chip-making process.

The company makes advanced semiconductor photolithography systems. (Stay with me here.) Photolithography is the process by which microscopic circuits are etched onto wafers that ultimately become individual chips. Literally every one of the billions of chips in the world today was made by this process. No matter who the manufacturer was, a lithography system was required.

Not only is ASML already the market leader in photolithography, but it also has the world’s only “extreme ultraviolet” system necessary to make the most advanced 7-nanometer-and-under chips. The growing shift toward 7-nanometer chips means even more market share for ASML – and higher margins.

The name might not be familiar, but ASML is in an enviable position. Its photolithography systems are an absolute necessity in manufacturing any kind of semiconductor chip, and when it comes to newer, denser chips, the company has a monopoly. That means it can take more share of a global market that continues to grow steadily, while also increasing margins and profits. That’s a winning hand, and one that comes with relatively low risk.

The post The Top 10 Stocks to Own for the Next 10 Years [PREMIUM PICKS] appeared first on The Motley Fool Canada.

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• How to Generate $150 in Passive Income With $30,000 in 3 Stocks
• 2 Canadian Stocks That Just Raised Their Payouts Again
• Have $2,000? These 2 Stocks Could Be Bargain Buys for 2026 and Beyond
• Looking for a 5.4% Average Yield? These 3 TSX Stocks Are Worth a Look

Fool contributor Iain Butler has no position in any of the stocks mentioned. The Motley Fool recommends ASML. The Motley Fool has a disclosure policy.

Motley Fool Canada analysts Nate Parmelee, Nick Sciple, Jim Gillies and Buck Hartzell break down how investors should consider financial stocks in the face of rising interest rates in Canada.

If you’re ready to invest better, Motley Fool Stock Advisor Canada can help. You don’t need a broker or a degree in Finance to grow your wealth. You just need a few minutes a month, and some great stock recommendations – and that’s what we’re here for. Try Stock Advisor Canada risk-free today.

Transcript

Nate Parmelee: I don’t want to go too far into academia and how people do valuations and how much interest rates increasing, how much of that matters, the change in interest rates. But if you just follow what’s taught in the textbook and adjust your discount rate based on what’s happening with interest rates, you will do exactly what the market is doing right now. You will get overly excited when interest rates are low and you will get super pessimistic as they go up. If you balance it out and just pick a middle-of-the-road interest rate and not buy as heavily when things get too expensive to that rate and buy more when they’re cheap relative to that rate, I think you’ll find yourself happier in the long run with your returns, and also just calmer throughout the whole process because you’ll be going back and forth, fearful that things are expensive or that you’re missing out, et cetera.

Nick Sciple: Nate, this is probably a good time to jump in. You’d mentioned wanted to talk some about financials. That’s one of the sectors of the market that is probably most directly affected by rates. These are folks transacting in money, and you know the cost of money is interest rates. When you look at the financial sector, what are you seeing today? How is that being impacted by rates?

Nate Parmelee: It’s not pretty. [LAUGHTER] Pretty much, everybody is seeing their margins squeezed because they’re having to pay more for deposits and more for capital, and they’re having a tougher time lending right now. Mostly because they’re worried that folks are going to be able to pay them back because they’re seeing an increase in non-performing loans as they go out. They’re getting tighter with lending, but not so restrictive as we’ve seen, say in the past during the financial crisis or even during the last.com bubble 20-some-odd years ago. It’s not quite to that point but it’s progressing in that direction still. Non-performing loans are continuing to increase. We see bank earnings estimates coming down pretty much across the board. If you follow the newspapers, you’ll see an analyst coming out every day or two saying they’re lowering their estimates for the big six banks. We’ve seen Chesswood, which is a small-cap commercial lender, does their own lending. They were pretty early to actually start reserving for more non performing loans last year, they’ve now gone ahead and said, and now we’re going to cut our dividend by 80% and preserve capital. I think more than anything just to take the risk off the table that they have to raise equity. It also allows them though, if things start to turn to be more aggressive because they will have more capital on hand coming in each month start going out as dividends, and they can be more aggressive lending as things start to change. It’s a tough picture out there. We also saw all the payment processors, especially the new wave of folks being Nuvei and Agen and PayPal basically all get slaughtered with their last earnings. I think PayPal probably came out of it the least damage. They actually had pretty good earnings and still went down by 10% with their results. Everybody’s getting hit pretty hard across the board in the financial sector right now.

Buck Hartzell: I think that presents opportunities. I think that presents opportunities for people that have discriminating kind of look at things in a longer term review, but because as you mentioned, Nate, like those are companies that are growing. I think they estimate the value of those businesses are growing. They’re relevant companies, and they’re going to be bigger, 45 and 10 years from now. The only question is how much bigger. We’d like the payments business. I think I do. I know you do as well, it’s a good business and there is change going on in the payments business. Then the question is, you had times where we had 0% interest rates around the world. I don’t think any of us was using a discount rate of 3% on those future earnings or whatever, we were all normalizing.

Jim Gillies: I never dropped below 10 personally.

Buck Hartzell: We didn’t play that game, but yet the valuations went way up because other people did, and then they came down. My premise is that you overshoot in both directions. Howard Marks has said this, it’s the pendulum idea, the farther it swings up on the overvaluation. It may come down to where it should be and it’ll run way past it again. That’s what we see in some of those growth businesses. There are high growers, and the rise in interest rates has certainly impacted evaluations. Over the long term though, I think for most of us, we kind of had a steadier review of things anyhow. But it goes by that price that it should have been at, and that presents opportunities.

The post What Rising Interest Rates Really Mean for Financial Stocks appeared first on The Motley Fool Canada.

More reading

• 2 TSX Stocks Priced Under $50 That Could Have Meaningful Room to Run
• How to Generate $150 in Passive Income With $30,000 in 3 Stocks
• 2 Canadian Stocks That Just Raised Their Payouts Again
• Have $2,000? These 2 Stocks Could Be Bargain Buys for 2026 and Beyond
• Looking for a 5.4% Average Yield? These 3 TSX Stocks Are Worth a Look

The Motley Fool has a disclosure policy, and many contributors may own shares of the securities that they discuss here. You can view an aggregated list of The Motley Fool’s employees’ holdings. The Motley Fool may also own or recommend securities discussed here.

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In hindsight, we were wrong to be excited about buying Nuvei (TSX: NVEI) when it was trading for $155 per share. Clearly, a significant component of that stock price was hype-driven, cryptocurrency-oriented irrationality. (We at Stock Advisor Canada do our best to avoid hype-driven situations, but it’s easier said than done.)

Now, though, with Nuvei’s stock price going for less than $25, the hype has left the building. If anything, we’re of the mind that the market remains irrational with its treatment of Nuvei; however, at today’s price, it’s to the negative side.

Case in point: the market’s treatment of Nuvei’s second-quarter results.

On the surface, revenue increased 45%, which, admittedly, is a tad misleading. “Organic” revenue, which excludes contribution from “digital assets,” was up “only” 20%. EBITDA less capex — a rough measure of free cash flow — rose 19%. Also included in the press release was a modest downward guidance revision for full year 2023 and lowered medium-term growth targets for the next few years.

Our take was that the company’s long-term outlook remains as it was. The market, however, had a very different take.

Maybe management knew that investors wouldn’t like the revised guidance, and that’s why they announced the initiation of a US$0.10 quarterly dividend (about a 2.3% yield today). CEO Philip Fayer also said that, with the dividend now in place, he’d be forgoing any stock-based compensation going forward. In case you’re worried about Mr. Fayer’s ability to keep his heat on this winter, that still translates to about US$11 million in dividend payments annually.

However, low dividend yields are not exactly what your average growth investor is generally seeking; indeed, initiating dividends is often taken as a sign by outside investors that the “rocket ship” growth they’ve been hanging their investment case on isn’t coming back. And in fact, the growth investors have exited Nuvei en masse. The stock is down by ~40% from where it was before the earnings release.

Admittedly, this isn’t a business we’ve necessarily fallen more in love with over the past few years. Payment processing is a competitive industry, although it’s big enough that many players can succeed. We’re more of the opinion that just as the market was wrong to price Nuvei at $155 per share, it’s potentially just as wrong to price it at $25.

Time will tell if Nuvei’s business will ever again be worth what it was. We’re comfortable suggesting, though, that it will be worth more than it is today.

The post Just Released: 5 Top Stocks to Buy in September 2023 [PREMIUM PICKS] appeared first on The Motley Fool Canada.

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Fool contributor Iain Butler has positions in Nuvei. The Motley Fool has positions in and recommends Nuvei. The Motley Fool has a disclosure policy.