3 Top Canadian Stocks to Buy for Oversized Returns

Not all stocks offer decent returns thanks to consistent and predictable growth. Many offer a magnificent payoff only when certain conditions are met.

| More on:

For most investors, predictable growth stocks are usually the best bet for the long-term growth of their investment portfolio, even if they tend to be slower than more erratic stocks. And since the majority flock to these stocks, they also tend to be more expensive. That’s the natural tradeoff to tying your capital to stock that might pay off only when certain conditions are met. But such stocks also have the potential to offer relatively oversized returns.

A tour operator

Transat (TSX:TRZ) is a Montreal-based tour operator that has been suffering alongside the rest of the touring and airline sector. The company was supposed to be bought by Air Canada, but the larger airline has backed out of the deal, leaving Transat to suffer a brutally harsh market. The stock is still 68% down from its pre-pandemic valuation. It spiked almost 70% earlier but has come down about 29% from that point as well.

The stock is likely to languish at or near these new lows, at least until the next holiday season. The risk is its financial viability till then. But if the tourism sector sees activity at or near the pre-pandemic levels, or TRZ gets another decent acquisition offer, the stock might spike again. And since it’s so far down its pre-pandemic valuation, if it goes to just that point, you can expect more than 100% growth.

A tech stock

BlackBerry (TSX:BB)(NYSE:BB) has already offered oversized gains in the recent past, and it might do so again. The trigger last time was Reddit. Next time, it might be a significant new contract or a breakthrough tech innovation. It is already making waves in vehicle automation, and once that market becomes more mainstream, BlackBerry stock might spike again.

It’s a long way down from its glory days when it was one of the most well-known names in the cellphone industry. And the glory days might not return again, but the company still has a strong reputation in the “security” realm, and if some of its cybersecurity products gain more traction, the company can grow in that arena as well.

A golden stock

When it comes to golden stocks, one condition that can trigger an upward momentum and ensure oversized returns is market turbulence. Kinross Gold (TSX:K)(NYSE:KGC), for example, grew almost 200% between 2019 (beginning) and the 2020 spike that was triggered after the crash. The stock has come down a long way since then, making it both discounted and quite undervalued.

It’s a good practice to hedge your portfolio with a few gold securities anyway. And if you buy Kinross when it has hit rock bottom and exit the position when it peaks after a market correction or crash, you might easily be able to double your investment, leaving you more capital. You can rebuild the “hedge” when the stock market is strong and gold stocks are down in the rut.

Foolish takeaway

The three stocks offer oversized gains, but they are not consistent growth stocks. You can’t rely upon the usual variable (time) for returns from these stocks and have to monitor the market for particular triggers that can cause a spike. But the good news is that while you do have to track the market to know when to sell, you have many more instances to buy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends BlackBerry.

More on Dividend Stocks

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »

young people stare at smartphones
Dividend Stocks

GST/HST “Vacation”: Everything Canadians Need to Know

The GST/HST "vacation" is a little treat for the holidays, along with a $250 payment. What should you do with…

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »