2 Sleeper Stocks With a Legit Shot of Doubling the TSX’s Return

For investors seeking top-notch sleeper stocks to buy in this uncertain economic environment, here are three top picks right now.

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For investors looking for value, finding sleeper stocks many investors are simply ignoring can provide outsized returns over time. Such stocks provide sneaky long-term total returns that allow some investors with otherwise less-than-sexy holdings to outperform over the long-run.

In fact, Canada has a number of stocks I’d categorize as sleeper picks, for long-term investors after relative value. I think the two stocks I’m going to highlight here have big potential to continue to provide excellent returns over the medium-term.

With that said, let’s dive in!

Spin Master

Spin Master (TSX:TOY) is a global children’s entertainment company operating in a global toy industry worth $100 billion. The company creates, manufactures, and markets various children’s products and entertainment properties. Currently, Spin Master has more than 30 offices in over 20 countries and generates sales from over 100 markets.

The company recently announced that it will report its fourth quarter and full year 2023 financial reports on February 28, after market close. Analysts are expecting some decent growth at the company, though investors don’t seem to be pricing in much of a surprise. As investors may have noticed, TOY stock has remained relatively flat since the beginning of the year, with most investors content on holding this stock and waiting to see what the company reports.

I’m of the view that Spin Master represents strong value, given its growth potential and core intellectual property/franchises. If the toy maker can continue to segue its solid portfolio of brands into additional movies, toys and games, there’s plenty of upside to be had in the quarters and years to come.

Trading at just 16 times earnings, Spin Master is worth considering as a top relative value pick in the entertainment business alone. However, a dividend yield of 0.7% provides a cherry on top, paying investors to be patient as the company continues on its growth path.

So long as Spin Master continues to provide solid cash flow growth, I think this is a stock that could continue much higher over the long term.

Fortis

Fortis (TSX:FTS) is a regulated gas and electric company in North America, operating predominantly in Canada and the U.S.. It provides its services and products to more than 3 million people, and has smaller investments in electricity generation and several Caribbean utilities.

The company recently reported earnings on February 9, and has dipped slightly following its earnings report. That said, earnings per share have been growing over the longer term (around 5% per year), allowing the company to continue raising its dividend distribution. With a current dividend yield of 4.5% and a 50-year track record of hiking its dividend distribution, this is a stock investors often look to as a bond proxy.

Thus, in this era of higher-for-longer interest rates, Fortis has become relatively less attractive for passive income investors. That said, for those banking on a cutting cycle from major central banks, I do think Fortis stock could receive a lift.

Fortis is a stock I think long-term investors need to buy on dips, and simply never sell. Right now, this stock appears relatively attractively priced, and it’s a position I think is worth holding for its income component alone.

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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends Fortis and Spin Master. The Motley Fool has a disclosure policy.

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