The resilient economy and expectations of rate cuts lifted the broader equity markets. While several stocks recovered and delivered exceptional gains, a few fundamentally strong stocks are on sale, providing solid buying opportunities near the current market price.
With this backdrop, let’s explore Canadian stocks that are solid long-term picks and trading at discounted valuations.
NorthWest Healthcare REIT
Down about 42% over the past years, NorthWest Healthcare Properties (TSX:NWH.UN) stock looks highly attractive near the current levels. The elevated interest rate environment took a toll on its finances, leading the management to cut its monthly dividend to strengthen its balance sheet and overall financial position. This didn’t go down well with the investors, leading to a decline in its price.
Nonetheless, the company’s efforts to solidify its balance sheet, expected rate cut, and continued growth in its same-property net operating income indicate that NorthWest Healthcare stock could witness a solid recovery. The company’s defensive real estate portfolio and high occupancy rate of 96% are likely to drive its same-property net operating income. Its assets and tenants are highly diversified. Further, it has a long average lease expiry term of 13.2 years, adding stability to its cash flows. Also, 82.9% of its leases are subject to inflation indexation, which allows it to grow organically.
While NorthWest Healthcare lowered its annual dividend from $0.80 per share to $0.36, it still offers a compelling yield of 6.9% (based on its closing price of $5.21 on January 11). Overall, investors can gain from the recovery in NorthWest Healthcare’s share price and monthly dividend payouts.
Aritzia
Aritzia (TSX:ATZ) stock closed about 21% higher on January 11 following its solid third-quarter fiscal 2024 financial result. Even though Aritzia stock spiked, it is still down over 36% in one year. As its stock is on sale, it presents a solid entry point near the current levels.
The company’s focus on adding newness to its products, expense management, and sourcing and operating efficiency will support its top and bottom-line growth. Further, its focus on opening new boutiques and expansion in the U.S. augurs well for growth. In addition, its focus on driving its brand awareness and multi-channel offerings are positives.
Aritzia expects its net revenue to grow at an annualized growth rate of 15-17% through Fiscal 2027. Moreover, its focus on reducing debt and improving efficiency will cushion its earnings and drive its share price.
Cargojet
Cargojet (TSX:CJT) underperformed the broader equity market over the past year and is trading in the red. Furthermore, shares of this leading air cargo company are down more than 45% in the last three years.
While Cargojet witnessed normalization in demand post-pandemic, its focus on enhancing efficiency and preserving cash amid challenges is positive. Further, the company’s fundamentals remain strong, led by its long-term customer contracts with minimum volume guarantees and renewal options. Moreover, its partnerships with leading logistics brands are earnings accretive and will drive its profitability in the future.
Overall, Cargojet, with its extensive domestic network and next-day delivery capabilities to a maximum number of Canadian households, is well-positioned to capitalize on the reacceleration in demand from the e-commerce sector. Moreover, its focus on network optimization, opportunities in the international markets, and debt reduction bode well for growth.
