3 UNDERVALUED TSX Stocks to Buy in January 2023

Looking for undervalued names? Here are some of those TSX stocks.

| More on:
Man data analyze

Image source: Getty Images

The interest rate-hike cycle will likely continue in the first half of 2023. So, valuation will likely be a big driver for stocks this year as well. If you are looking for undervalued TSX stocks, here are some of them.

Baytex Energy

Canadian energy names delighted shareholders last year with massive gains. In 2023, some mid-cap energy stocks look better placed than their larger counterparts. One among them is Baytex Energy (TSX:BTE). It has returned 31% in the last 12 months.

BTE stock is currently trading 2.5 times its 2023 cash flows and five times its earnings. This looks discounted against peers and offers notable value for 2023.

Baytex Energy has a diversified asset base, with one-third of its production coming from the Eagle Ford basin in the United States. Notably, 40% of its production is light oil and receives a premium rate than West Texas Intermediate (WTI). This lowers its exposure to the Canadian benchmark Western Canadian Select, which trades at a significant discount to WTI.

BTE stock has dropped 35% since August 2022. But it could change course and turn higher this year with oil and gas prices climbing higher on supply woes.

B2Gold

Gold and gold miner stocks lost value for the most part in 2022. But since November, the yellow metal has started to regain its sheen as the picture on the macro front has started showing some pivot. If the interest rate hike cycle pauses this year, it will likely make the bullion appealing again.

Canadian gold miner B2Gold (TSX:BTO) is one attractive bet for this year. The stock has rallied 40% since November and might keep trading strong in 2023. It operates high-quality mines in Africa and has seen a decent increase in production in the last few years.

BTO stock is currently trading 16 times its earnings and looks relatively undervalued. Peers are trading close to 20 times earnings. Notably, if the yellow metal keeps trading strong, gold miners will see substantial earnings boost and value creation for 2023.

Bank of Montreal

Bank of Montreal (TSX:BMO) stock has gained 10% since last month but is still 15% below its all-time highs. BMO stock currently looks appealing as it is trading at 1.3 times its book value. That’s below peers’ average.

Notably, BMO offers earnings and dividend stability that’s particularly valuable in these uncertain times. Plus, it has a strong credit profile, which makes it resilient compared to peers in a probable economic shock.

BMO stock currently yields 4.4%, marginally higher than TSX bank stocks. Notably, it has paid dividends for the last 194 consecutive years.

However, the current strength in TSX bank stocks might lose steam soon. As banks south of the border are seeing higher provisions, Canadian banks will also see lower earnings due to the same. BMO plans to release its earnings by the end of next month. So, short-term weakness might prevail in TSX bank names then, which will be a more prudent time to enter stocks like BMO.  

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.

The Motley Fool recommends B2Gold. The Motley Fool has a disclosure policy. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Investing

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »

Paper Canadian currency of various denominations
Bank Stocks

1 Magnificent Canadian Dividend Stock Down 28% to Buy and Hold for Decades

This top Canadian dividend stock is underperforming its large peers this year, but a turnaround could be on the horizon.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »

hand stacks coins
Investing

Secure a Wealthy Future With These 3 Canadian Stocks

These Canadian stocks have the potential to appreciate substantially over time and may also enhance returns through dividend payments.

Read more »

Tractor spraying a field of wheat
Dividend Stocks

Is Nutrien Stock a Buy for its Dividend Yield?

Nutrien is down more than 50% form the 2022 highs. Is NTR stock now oversold?

Read more »

analyze data
Investing

3 Blue-Chip Stocks Every Canadian Should Own

These blue-chip stocks are backed by large-cap companies with well-established businesses, solid fundamentals, and a growing earnings base.

Read more »

dividends grow over time
Stocks for Beginners

The Smartest Growth Stock to Buy With $2,000 Right Now

Do you have $2,000 to invest for the long term? These three TSX stocks have and will continue to deliver…

Read more »