2 Tanking Canadian Stocks to Buy on the Dip

North West Company (TSX:NWC) and another tanking Canadian stock are worth buying and holding on the latest dip.

| More on:

Tanking Canadian stocks aren’t necessarily the greatest bargain plays. That said, whenever you’ve got a fast-falling stock, the degree of market inefficiency may be at a high point. Undoubtedly, every investor wants to be on the receiving end of a massive bounce after they’ve punched their ticket to a crumbling stock.

Unfortunately, Mr. Market couldn’t care less about when you or any other investor gets into a stock. Indeed, fast-falling knives can do some damage, at least over the near term, to investors who are just looking to book a quick profit, with less consideration for the long-term fundamentals.

At the end of the day, near-term noise blows over, leaving the long-term fundamentals intact. The real question for investors is whether recent weakness in a name is warranted or if it’s just noise. Indeed, the ability to tell the difference between noise and actual fundamental-decaying news is an incredible asset to have.

Top Canadian buy-the-dip candidates for 2022

In this piece, we’ll have a look at two stocks that turned violently in recent weeks but are likely candidates to ricochet back to new highs in as few as 18 months. Consider shares of grocer and retailer North West (TSX:NWC) and number-six Canadian bank National Bank of Canada (TSX:NA). Both stocks have turned violently of late, as their peers continued to hold their own. Indeed, there are company-specific issues that may need further analysis by investors before any dip-buying is conducted. Let’s have a closer look at each name to determine if either is a better fit on weakness for your portfolio.

North West

North West is a mid-cap retail play that few Canadians know about. It’s a retailer primarily operating in rural locations in North America’s northwest. The stock has proven to be quite resilient to broader market volatility through the pandemic, with steady appreciation since the bottom put in back in March 2020. With a 4.3% dividend yield and a low beta, NWC stock is the ultimate defensive way to bring the fight to inflation.

Over the past year, NWC stock has run out of steam, returning just 5% year to date. More recently, the stock plunged around 8% from its recent high, as investors were not impressed with the company’s latest financial results. Indeed, grocers have been a great way to dampen the hit from inflation. Food is a necessity, and grocers are better equipped to pass the costs on. Unfortunately, shipping costs have also been elevated, and as an operator in rural locations, the firm has felt the pressure across both fronts.

Moving forward, it’s likely that inflation will come back down as central banks raise rates. North West is doing its best to adapt in the environment, and as the stock flirts with a correction, I’d look to be a buyer of the top-tier defensive.

National Bank of Canada

National Bank of Canada went from top performer to laggard after the curtain was pulled on the latest earnings results. Fortunately, I don’t think the relatively weak quarter is the start of a trend for National Bank. The bank is leading the charge for consumers by doing away with trading commissions.

In time, I think National Bank will begin to take further steps to apply a bit more pressure to its five bigger brothers in Canada’s banking scene. As the bank expands its presence across the country, I think it can take share. After an 11% peak-to-trough drop, NA stock seems ripe for picking, as it seems to be a relative bargain in a space poised to ride on major rate-induced tailwinds over the next few years.

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends THE NORTH WEST COMPANY INC.

More on Investing

Canadian dollars in a magnifying glass
Dividend Stocks

3 High-Yield Dividend Stocks That Are Screaming Buys Right Now

Are you looking for great income stocks? Here's a trio of high-yield dividend stocks that pay insane yields right now.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Bank Stocks

Best Stock to Buy Right Now: TD Bank or Manulife Financial?

Manulife continues to see momentum in its business and stock price, while TD Bank stock remains down and out.

Read more »

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy With $1,000 Right Now

These three Canadian tech stocks could be among the best growth opportunities in the market right now.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Transform a $5,000 TFSA Into a $50,000 Retirement Nest Egg

The TFSA is a powerful tool that can grow a small investment into a substantial retirement nest egg over time.

Read more »

Canadian Dollars bills
Metals and Mining Stocks

2 Cheap Canadian Stocks Under $20 to Buy This November

Cheap TSX stocks such as Endeavour Silver are trading at an attractive valuation in November 2024.

Read more »

happy woman throws cash
Tech Stocks

3 Growth Stocks That Could Be Long-Term Wealth Creators

These three growth stocks aim to grow their financials at a higher rate than the industry average, thus delivering superior…

Read more »

how to save money
Bank Stocks

This 5.9% Dividend Stock Pays Cash Every Month

First National Financial (TSX:FN) has a 5.9% yielding dividend that is paid out monthly.

Read more »

gift is bigger than the other
Investing

The Best Canadian Stocks to Buy With $5,000

These Canadian companies have solid growth prospects and the ability to deliver profitable growth even at a large scale.

Read more »