The TSX Index is abundant with cheap Canadian stocks that are still considerably off their all-time highs. In this piece, we’ll have a look at two of my favourites to buy on the latest bout of weakness.
While their share prices may have more downside, I still think they’re falling knives that are worth reaching out for ahead of what could be an economic recovery, the likes of which we may not have witnessed since the rise out of the Great Financial Crisis of 2008-09.
Without further ado, let’s have a closer look at the two undervalued Canadian picks that are down by at least 30% from their highs.
Barrick Gold (TSX:ABX)(NYSE:GOLD), the gold miner that Warren Buffett briefly owned for a period in 2020, fell into a vicious bear market to end the year. Gold prices fell below from above US$2,000 to below US$1,700, dragging the most promising gold miners into the gutter.
As you may know, gold miner stocks are a levered way to play the underlying commodity. As gold looks to turn things around in 2021, I think the miners are where you’ll want to be for maximum appreciation. Gold miners look like wonderful Canadian stocks here, but I don’t think they’ll stay that way for the year.
My favourite miner in the space has to be Barrick at this juncture. It’s well run and will be a major beneficiary of any gold appreciation as a result of the latest round of stimulus that could pave the way for an alarming spike in the rate of inflation, possibly even more alarming than the bond market has suggested these past few weeks.
With a swollen 1.8% dividend yield, I’d say Barrick stock is one of the most productive ways to play an unproductive asset like gold. Shares of Barrick Gold are down 35% from their high — that’s a golden buying opportunity in my books.
Up next, we have Canadian pipeline kingpin Enbridge (TSX:ENB)(NYSE:ENB), which currently sits down 31% from its 2015 all-time high. Despite the profound industry headwinds and regulatory hurdles faced by the high-yield dividend darling, the company’s management team has shown they’ve got the levers to pull to relieve pressures from impacting the dividend or its long-term dividend-growth rate. Talk about a resilient Canadian stock!
With one of the most shareholder-friendly managers out there, I think Canadian income investors can trust that the firm won’t take its payout to the chopping block, as many other energy players had during the worst of the coronavirus crisis last year. At the time of writing, Enbridge stock sports a juicy 7.4% yield, down from around 8.5%, when ENB stock was at its ominous 2020 lows.
More recently, the company announced the Calvados offshore wind project that should make Enbridge stock more ESG-friendly through the eyes of millennial investors. As headwinds fade and the Canadian stock corrects upwards, I’d look for the 7.4% yield to compress below 6%. So, if you like the company and seek a high yield, now is the time to load up on shares before they make a run for those highs.
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