The TSX Composite Index is showing some correction after a Santa Claus rally in the last two months of 2023. The market has been range-bound since June 2022, as rising interest rates divided investors’ attention to the bond market. However, 2024 will see interest rate cuts that could reverse the trend and revive discretionary stocks. The market bull run will depend on the timing of the interest rate cut.
Three no-brainer stocks to buy before a bull run
Nobody can time the market with accuracy. However, macroeconomic indicators like interest rates and inflation can help you make an educated guess in which directions some sectors will move. I have identified three growth stocks that fell due to economic weakness. They have the potential to ride the bull and generate more than 20% return in a year.
HIVE stock
Risk-averse investors might not think HIVE Digital Technologies (TSXV:HIVE) is a no-brainer stock. But if you carefully look at the stock’s fundamentals, its Bitcoin inventory and graphic processing unit (GPU)-powered data centres have limited its downside at $4. Bitcoin is the most stable cryptocurrency, and as we have observed in the last three years, BTC prices move in tandem with the economic scenario.
If you are bullish on the economic recovery, BTC prices will likely increase, driving the stock price of Hive. Moreover, the artificial intelligence (AI) frenzy has just begun. Many big companies hesitated to invest huge amounts in advanced technology amid business uncertainty. A recovery in the business environment could attract investments in these projects. Plus, the 5G rollout could pave the way for AI at the edge. And Hive is offering digital cloud computing services for developers tapping this momentum.
Hive is a stock worth buying at $4-$4.5 and selling at $8-$8.5 for short-term profits. If you are in it for the long term, $4-$4.5 is a good entry point, and the exit point would be another crypto bubble when the stock surges past $20.
Magna stock
Magna International (TSX:MG) stock has dipped 18% since February 2022, as high material prices and semiconductor supply shortage disrupted supply and rising inflation and interest rates slowed demand. The growth of electric vehicle (EV) sales slowed in 2023, but there is still demand for lightweight vehicles. Countries are building EV infrastructure, and automakers are lowering the prices of EVs to boost adoption.
Magna moves with the automotive trend as a supplier of power, vision, and body exteriors to top automakers. It has been building EV power terrain and components for autonomous cars. As a supplier, Magna is a cyclical stock that will jump when EV demand picks up.
The best way to make money from cyclical stocks is to buy in the downcycle and hold. It may not give positive returns for a few years. However, when the cycle turns, the stock could grow 50-80% within two to three months, making up for the years of wait. While you wait for the upcycle, you can enjoy a 3.4% annual dividend.
Air Canada
Air Canada (TSX:AC) is a no-brainer stock to buy ahead of the bull run. You have seen the last two year’s momentum. The same momentum is likely to be repeated this summer. The airline stock is trading closer to $18 price despite improving net income. Air Canada is likely to report strong 2023 earnings in early February that could push the stock into a bull momentum. The summer of 2024 could see the return of leisure travellers. Although the growth will slow because of a strong base year, easing oil prices could keep Air Canada’s profits upbeat.
However, the stock has been range-bound since the pandemic, as the airline diluted shareholders’ interest by issuing new equity shares to raise capital. Hence, a good exit point for this stock would be $24.5, as it could fall after crossing this mark.
