FRU:CC - From Bear to Bull: The Canadian Stocks Set to Bounce Back the Strongest

2023-11-09 15:30:00 ET

One of the best things about investing in the stock market is all the options you have to choose amongst Canadian stocks for your portfolio.

There are stocks of different sizes, in different sectors and industries and at different stages of growth, allowing you to diversify your portfolio to minimize risk. It also allows you to take advantage of growth stocks as some stocks outperform others.

There are millions of factors both in the economy and market that impact the value of stocks. This is why, even as some stocks are falling in value, others are growing rapidly.

That’s precisely what we’re seeing today. Although the overall economy continues to worsen and many companies are being impacted, a handful of businesses are seeing a turnaround in their operations, which could lead to significant growth in their share prices.

So if you’re looking for stocks to add to your portfolio today, here are two of the best to buy while they are still dirt-cheap.

A top recovery stock with significant upside potential

For over three years now, Cineplex ( TSX:CGX ) stock has been struggling. However, we could finally begin to see a significant rally from the stock as sector-wide headwinds continue to ease.

The pandemic is no longer impacting operations, the writers’ strike has already ended, and the actors have now reached a tentative deal with studios as well. Furthermore, the theatre industry has proven time and again it’s relatively resistant in recessions.

So, with all the main headwinds that were impacting Cineplex now gone, the stock has a significant opportunity to rally, especially with the financial performance it keeps showing.

For example, in the third quarter, Cineplex generated a quarterly record for revenue of $464 million, compared to estimates of $452 million. It also reported another quarterly record of $125.9 million in adjusted earnings before interest, taxes, depreciation and amortization ( EBITDA ) compared to the consensus estimate of $113 million.

The Canadian entertainment stock continues to show time and again that its business is back on track after the pandemic, yet it still trades below $10, roughly 70% lower than its pre-pandemic price. And at current prices, Cineplex is trading at just 6.6 times its expected earnings over the next four quarters.

So if you’re looking for high-potential Canadian stocks to buy now, I’d consider Cineplex soon before the stock sees a significant rally in its share price.

One of the best Canadian stocks to buy in the energy sector

Another high-quality Canadian stock that you can buy undervalued today, and one that’s especially ideal for dividend investors, is Freehold Royalties ( TSX:FRU ).

With the economy facing numerous headwinds and many expecting a recession in the near term, Freehold and the entire energy sector have seen volatility in energy prices recently. Furthermore, higher interest rates are making it more expensive for companies to operate, which could also impact production growth.

So although Freehold is a lower-risk Canadian stock, since it collects royalties from other energy companies producing oil and gas on its lands, it still will be impacted by sector-wide headwinds, as we’ve seen recently.

However, the fact it has a low-risk business model and keeps its payout ratio manageable makes Freehold a stock you can buy and hold with confidence. Not to mention its diversified portfolio of land in both Canada and the U.S. is also key to reducing risk.

For example, in the third quarter, Canadian production was down, but in the United States, Freehold saw a 12% increase in production, which helped to offset the decline north of the border.

Therefore, while this high-quality Canadian stock trades off its highs and offers an impressive yield of more than 7.4%, it’s certainly a stock to consider buying now before it potentially sees a massive bull run.

The post From Bear to Bull: The Canadian Stocks Set to Bounce Back the Strongest appeared first on The Motley Fool Canada .

Fool contributor Daniel Da Costa has positions in Freehold Royalties. The Motley Fool recommends Cineplex and Freehold Royalties. The Motley Fool has a disclosure policy .

2023