3 Beaten-Down Stocks That Could Take Off in a New Bull Market

Not all beaten-down stocks can experience a revival in market-wide bullish trends. Many of them might require sector/industry-specific catalysts to take off.

| More on:

It’s important to understand that not all beaten-down stocks may experience a revival when the market turns bullish. That’s because the factors behind their slump may vary and are often rooted in aspects other than a weak market.

They might be associated with the stocks themselves or the sectors, but understanding what they are may help you choose the right beaten-down stocks during or before a bull market.

An energy stock

Energy stocks in Canada are experiencing a revival as the oil prices go up, but the same cannot be said for Parex Resources (TSX:PXT). There are a few differences to account for this lack of activity in this stock, starting with the geography it operates in (Colombia). The company also announced a production cut, which is just one of the factors that caused the stock to slump about 50% in five months.

However, there are a few things that make this beaten-down stock worth looking into. It’s a highly attractive valuation for one. The stock is trading at a price-to-earnings ratio of about 2.9, making it highly undervalued.

It’s also offering a generous (and, to an extent, dangerously high) yield of about 12.7%. If there is even a mild chance that the stock starts recovering in this energy bull market or the next holistic bull market, buying now can help you get the best of both worlds (dividends and recovery-fueled growth).

A tech stock

Telus International (TSX:TIXT), which has rebranded itself as Telus Digital, is a customer experience-focused tech company. It’s also leaning heavily towards artificial intelligence (AI), not just as a service segment but also to enhance some of its solutions. But this has yet to pay off, and the company is currently trading at an 88% discount on its initial price.

This brutally discounted tech stock might be ready to turn things around. Insiders have recently bought a lot of this stock, which shows internal confidence in the company’s future. It’s also poised to ride the AI hype train to recovery and growth. At its current price point, the company can offer exceptional returns to its investors simply by growing up to its initial public offering price.

A cannabis stock

Cannabis stocks like Curaleaf Holdings (TSX:CURA) require a specific bull market to gain positive momentum. They need a sector-wide bullish trend, ideally fueled by the U.S.’s marijuana legalization (on a federal level). The stock is currently trading at a 45% discount from its peak, and even a modestly positive outlook can cause it to surge upward.

As primarily a U.S.-based company, it’s even more well-positioned to surge in the wake of U.S. federal marijuana legalization than other Canadian stocks. It already has a presence in 17 U.S. states, and this footprint and brand recognition can help it capture a massive portion of the U.S. market in the right conditions.

Foolish takeaway

The three beaten-down stocks are worth keeping an eye on but not necessarily buying right away. All three require different circumstances and different bull markets to see a considerable amount of growth. Buying them just before these circumstances trigger a positive bullish phase might let you capture most of the growth these stocks have to offer on their recovery journey.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Parex Resources and Telus International. The Motley Fool has a disclosure policy.

More on Dividend Stocks

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »

young people stare at smartphones
Dividend Stocks

GST/HST “Vacation”: Everything Canadians Need to Know

The GST/HST "vacation" is a little treat for the holidays, along with a $250 payment. What should you do with…

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »