Many investors know that some of the best investments to make on the TSX today are in high-quality Canadian value stocks.
Value investing is one of the most successful strategies for long-term investors. It perfectly encapsulates buying low and selling high.
Value investing is not that straightforward, though. It’s entirely possible that a lot of these investments don’t work out — even though you buy the stock while it’s trading undervalued, it could never recover and continue to fall in price over time.
This is one of the main risks to consider when value investing. Any time a stock is trading cheap, there’s a reason. For example, last year, when the market was crashing, and the whole market was cheap, the risk was with the unknowns of the pandemic.
There was real panic and real uncertainty. So, although now it looks like a no-brainer to have been buying Canadian value stocks back then, at the time, it wasn’t so straightforward.
To find value on the TSX today, you have to look for the same type of situation — businesses that the market is missing out on today that in the future many will look back and think was obvious.
Stocks may always trade cheap for a reason. That doesn’t mean the reason is always good. So, it’s up to investors to find the stocks that are trading undervalued when they really shouldn’t be. These will be the best opportunities.
With that in mind, here are two of the top Canadian value stocks buy on the TSX today.
One of the cheapest stocks on the TSX today
If you’re looking for top Canadian value stocks to buy today, there is no better place to start than the gold sector.
Not only have gold stocks gotten extremely cheap lately, but there are several catalysts as to why they could rally any week now.
All gold stocks aren’t equal, though. For example, higher-growth gold stocks with more volatility could perform poorly if gold prices don’t recover.
That’s why if you’re going to take advantage of the discount and buy gold stocks today, I’d stick to an established business that is generating a tonne of cash flow, like B2Gold (TSX:BTO)(NYSE:BTG).
B2Gold is one of the lowest-cost gold stocks that you can buy on the TSX today. Even as prices fall, B2Gold still has incredible margins and generates tonnes of cash flow each quarter.
This is crucial, because the company pays a tonne of that cash flow back to investors. Currently, its dividend is yielding just under 4%.
So, even if the stock doesn’t recover all that soon, the company can still earn a tonne of money, and investors will receive an attractive dividend while they wait. I doubt that will happen, though, as B2Gold can’t stay cheap forever. At current prices, it’s trading at a forward price-to-earnings ratio of just 8.7 times.
If you’re looking for a top Canadian value stock to buy today, B2Gold is easily one of the best opportunities on the TSX.
A top Canadian value stock to buy now
Another high-potential Canadian stock offering a tonne of value today is Cineplex (TSX:GCX). Ever since the pandemic started, Cineplex has been one of the hardest-hit stocks on the TSX, but today, as its operations are now opening back up, it’s offering a tonne of recovery potential.
After numerous lockdowns in Canada over the last year, along with plenty of ups and downs for Cineplex stock, investors are taking a more cautious approach this time.
This is leaving the stock ultra-cheap, especially for investors willing to take the risk and buy today.
The Canadian value stock is not nearly as risky as owning other recovery stocks like an airliner in this environment. So, although there is a significant amount of risk in buying this TSX stock today, there is considerable upside as well.
And as the stock continues to fall, it’s only getting more attractive. So, if you’re looking to buy a top Canadian value stock today, I’d consider taking a long-term position in Cineplex.
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 Daniel Da Costa owns shares of B2GOLD CORP. The Motley Fool recommends CINEPLEX INC.