In the stock market, buying stocks that are priced below their intrinsic value is one of the strategies that long-term investors use to outperform the broader market. Over the past three months, the Canadian stock market has been riding high. Since late October, the S&P/TSX Composite Index has gained more than 10 per cent and is close to the all-time highs set in early 2022.
That said, some high-quality TSX stocks continue to trade at discounts, providing opportunities for long-term investors willing to be patient. In the search for value stocks, it’s important to first figure out if the cause of the stock price decline is weakness in the industry or sector as a whole, or if it’s due to the company itself. In many cases, the factors affecting the stock price can be a double-edged sword, causing short-term investors to fall into a value trap.
For long-term investors, on the other hand, there is much less pressure to buy stocks at low levels. Short-term headwinds can be negligible if one is bullish on a company’s long-term growth potential.
Both of the following TSX value stocks have generated outperforming returns, but have underperformed recently. However, solid fundamentals means this slump won’t last long.
Agnico Eagle Mines (TSX:AEM) is a no-brainer value stock, with a current share price of around C$66 per share and a dividend yield of 3.2%, which is also one of the highest dividend yields among gold mining stocks. In anticipation of interest rate cuts, many analysts and investors believe that the price of gold will hit another record high in 2024, which means that the profitability of gold producers will continue to get a boost. Therefore, this gold stock is worth considering if one wants to profit while waiting for gold to really shine. The company’s management has maintained strict financial discipline, and past mergers and acquisitions have helped unlock more value for long-term shareholders.
It’s worth pointing out that the company recently purchased a minority stake in Canada Nickel. While Agnico is predominantly a gold business, gold is not the company’s only mineral. The small investment in Canada Nickel is nothing more than a drop in the bucket for the company. However, in the long run, the investment could be worth every penny. This mining stock is a very solid choice right now for Canadian value investors hungry for great passive income.
Northland Power (TSX:NPI) is one Canadian stock that has been impacted by the slowdown in growth across the sector, and the entire renewable energy space has been on a downward spiral since the beginning of 2021. Volatility aside, the long-term growth potential for global renewable energy consumption actually remains solid. That’s why now is a great time to put money into a Canadian energy stock like Northland Power.
Since the beginning of 2021, Northland Power’s share price is down 50 per cent, excluding dividends. It’s also due to the falling share price that the company’s dividend yield is currently at a level close to 5 per cent. It may take some time for the renewable energy industry to get back on track. But at least while it waits, Northland Power can still be a reliable source of passive income.
