This summer, adding stocks with better potential risk-adjusted returns is a gift every investor should give themselves. Returns need to be taken in the context of risk. On that note, these three stocks are among the best risk-reward options on the TSX, in my view.
Let’s dive in.
WPT Industrial REIT
The economy is gearing up to recover from the impact of this pandemic. However, not every sector will be quick to bounce back to its previous state. For instance, there is much speculation that real estate classes like retail and office could continue to witness some level of decline moving forward.
However, these are just two real estate classes. Industrial real estate is among the few I think will continue to outperform. And WPT Industrial REIT (TSX:WIR.U) happens to have a best-in-class portfolio of such assets.
Indeed, warehouses and distribution centers are going to emerge as the backbone of the current e-commerce revolution. In the U.S., where WPT is focused, this trend is absolutely skyrocketing of late. I challenge readers to try to come up with a bearish thesis on this sector. It’s difficult.
WPT’s premium asset portfolio and relative valuation makes this stock attractive. Additionally, the company’s 4.5% yield is extremely attractive for those with income needs.
Algonquin Power
Investors with an eye on the perfect blend of growth and income should include Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) on their watch list. Algonquin is without question a top player in the Canadian utilities sector and a reliable bond proxy.
However, investors have been sleeping on Algonquin for one key reason. The company’s an emerging player in the renewable power segment. Via a series of acquisitions, Algonquin has slowly and quietly crept into this space. It’s a hybrid utilities/ESG play that’s not getting enough attention right now, in my view.
The growth Algonquin’s renewable power segment provides in combination with the defensiveness provided by the company’s regulated utilities business is a one-two punch that’s hard to find today. Accordingly, this stock remains one of my top picks.
BlackBerry
Perhaps the highest-risk option of the three, I think BlackBerry (TSX:BB)(NYSE:BB) has one of the best upsides of the group.
Indeed, BlackBerry has been entangled in some pretty intriguing meme stock hysteria earlier this year. With that speculative fervor seemingly over, investors now have the opportunity to assess this company on the basis of its growth profile and fundamentals.
And I can’t think of many companies better than BlackBerry given its valuation today.
BlackBerry is an active player in the high-growth sectors of today’s tech market such as software and cyber security. The company’s partnership with Amazon to develop BlackBerry IVY creates ample room for growth and sustained cash flow. Similarly, its transformational acquisitions of BlackBerry, like the 2019 Cylance deal, render it a force to be reckoned with in the space of artificial intelligence and advanced tech in general.
Indeed, there’s much to like about this stock, especially given its long-term growth prospects.
