2 Cheap TSX Stocks to Buy Hand Over Fist, and 1 to Avoid

There are plenty of high-quality TSX stocks trading at insane bargains right now. Here’s two top stocks to buy and one to avoid today.

| More on:

The TSX Index has declined over 12% in 2022, but that masks the fact that many TSX stocks are down by multiples of that. Some stocks are down justifiably due to rich valuations, poor operational performance, or financial challenges.

Yet, several high-quality stocks are cheap largely due to broad market sentiment. These are what acclaimed technology sector analyst, Mark Mahaney calls “dislocated high-quality stocks,” or DHQs. These are long-term winners that happen to be beaten up simply because the market is falling.

Look for “dislocated high-quality stocks”

These are the types of stocks investors should consider buying on any severe market dip. It may feel uncomfortable. However, if your timeframe is multiple years in the future, you can have a good level of confidence that the bearish sentiment won’t last forever. When that sentiment shifts, these stocks can have significant upside.

Cargojet: A cheap TSX growth stock

One relatively cheap TSX stock I am eyeing is Cargojet (TSX:CJT). Its stock has fallen 30% in 2022 and 40% over the past year. After such a severe decline, investors can buy Cargojet stock for eight times enterprise value-to-EBITDA. For context, the last time it was this cheap was in 2013.

Cargojet has grown into the leading overnight freight air carrier in Canada. Its network touches nearly 90% of the Canadian population across 16 major cities. It has steadily been taking freight market share from passenger airlines as they have struggled to recover from the pandemic.

Just last quarter, Cargojet grew revenues and adjusted EBITDA by 43% and 20%, respectively. A few weeks ago, it laid out a five-year plan to expand internationally and nearly double revenues, adjusted EBITDA, and free cash flow.

Brookfield Infrastructure: A top TSX dividend-growth stock

Another high-quality stock I’d consider buying today is Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP). This is a noteworthy stock if you are looking for a combination of income and growth. Over the past two weeks, this TSX stock has fallen by 13%. Today, it is trading with an attractive 4.15% dividend yield.

You can buy BIP stock for 12 times funds from operations (FFO). Other than the March 2020 market crash, BIP stock has not been this cheap since early 2019.

BIP has a diverse portfolio of essential infrastructure assets around the world. These are very defensive assets with long-term contracts and attractive organic growth opportunities. If a recession hits, it can deploy its solid balance sheet by investing in cheap acquisitions. In the meantime, investors get to own a collection of low-risk assets and earn a healthy dividend (that should also grow, too).

Beware of high-flyers and overvalued stocks

When the stock market is bearish, investors should take advantage of dislocated stock prices and buy high-quality businesses. However, during bear markets, it is important to ensure that you are not overpaying. One TSX growth stock Shopify (TSX:SHOP)(NYSE:SHOP) has fallen 78.6% in 2022.

Yet, it still trades at 5.7 times sales! Shopify’s business has slowed considerably since the pandemic. Last quarter, sales growth slipped into the mid-teens range and the company had a huge net loss of $1.2 billion.

While Shopify has some highly demanded e-commerce services, the company remains unprofitable. It could get hit particularly hard in a recessionary environment. At the current valuation, Shopify will need to execute nearly perfectly on its growth plan to justify its current price. That leaves very little margin for safety.

The bottom line

There are plenty of profitable high-quality TSX stocks trading at very attractive valuations today. Forget high-flyers that continue to trade at ridiculous prices and instead focus on great businesses with fair valuations and long-term growth ahead.

Should you invest $1,000 in Shopify right now?

Before you buy stock in Shopify, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Shopify wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

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 Robin Brown has positions in Brookfield Infrastructure Partners, CARGOJET INC., and Shopify. The Motley Fool has positions in and recommends CARGOJET INC. and Shopify. The Motley Fool recommends Brookfield Infra Partners LP Units. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Stocks for Beginners

Income and growth financial chart
Tech Stocks

2 Canadian Stocks That Could Turn $10,000 Into $100,000

If you're looking for growth and income, these two are some of the best options out there.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

The Best Canadian ETFs $1,000 Can Buy on the TSX Today

If you're looking for ETFs that can turn $1,000 into strong cash flow, then these are the ones I'd go…

Read more »

dividend growth for passive income
Dividend Stocks

4 Canadian Dividend Stocks to Buy and Hold for the Next 20 Years

These dividend stocks can certainly stand the test of time, and have already done so for many investors.

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

1 Practically Perfect Canadian Stock at All-Time Highs to Buy Now and Hold for a Lifetime

This top Canadian stock owns many of the brands Canadians use every day, checking all the essential boxes.

Read more »

analyze data
Stocks for Beginners

The Best Canadian Stocks to Buy Right Away With $30,000

These three top Canadian stocks have one thing in common: stability. Let's get into why.

Read more »

Stocks for Beginners

1 Magnificent Canadian Stock Down 37% to Buy and Hold Forever

The Canadian stock we're discussing may not seem essential, but parents would argue otherwise.

Read more »

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

How I’d Structure My TFSA With $14,000 for Almost Constant Monthly Income

These four choices could make any $14,000 investment a strong one, especially with solid dividends that will stand the test…

Read more »

Muscles Drawn On Black board
Dividend Stocks

The Best Canadian Stocks to Buy Right Away With $4,000

Seeking strength from your investments? Then these are the three stocks to consider first.

Read more »