In this article, we will discuss the 10 Oversold Canadian Stocks to Buy Right Now.
Ratings agency S&P Global believes that Canada’s economy has been performing slightly better than it forecasted a quarter ago, but still remains subdued. The company projects GDP growth of 1.2% in 2024 before accelerating to 2.0% in 2025. The firm went on to say that the Bank of Canada (BoC) is expected to cut interest rates to 3.75% by year-end 2024 and 2.50% in 2025.
It expects that the rebound in economic growth should stem from fixed investment–both residential and non-residential—instead of consumer spending. The monetary easing cycle that kicked in June might help flip investment outlays from contraction last year to expansion. TD Economics believes that consumer spending is expected to undergo a period of below-trend growth through 2026, as households in Canada save more amidst increased mortgage debt. Business investment might grow above the trend. The need to establish more homes should result in increased residential investment, and the opportunity to fast-track the clean energy transition might boost investments in structures, machinery, and equipment.
What To Expect in Q4 2024 from BoC?
On 4th September, the BoC decreased the overnight interest rate by 25 bps for a 3rd consecutive meeting, as was widely anticipated by the broader market. However, the ratings agency believes that the current policy rate remains relatively restrictive in comparison to the longer-run estimate of neutral and against a backdrop of economic growth which is below potential.
Following the September meeting, there were hints at further cuts. This means that the central bank has pivoted its focus to downside risks to the economic growth outlook, with inflation now slowing down. BoC governor highlighted that policymakers are required to safeguard against the risk that the economy is too weak and inflation declines too much. As per the ratings agency, the higher unemployment, together with persistent decreases in per-capita GDP, should help push inflation lower. The company expects core consumer price index (CPI) growth of 2.0%-2.5% over the next 12 months but with risks of undershooting 2.0%. Notably, potential rate cuts are expected to cause mortgage-fueled inflation to decline sharply for the remainder of the year.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Understanding Canada’s Labor Market Dynamics
The ratings agency believes that the underlying trend since May has been weaker hiring and increased unemployment. The cumulative lagged effect of increased interest rates is expected to continue to weigh on consumers. Despite BoC starting an easing cycle, borrowing costs are expected to remain much higher over the next 2 years than COVID-19 pandemic lows. This is because of the mortgage renewal system in Canada. Several homeowners are expected to see interest payments as a share of income rise in the upcoming 5-year mortgage renewals over 2025 and 2026, relative to 2020-2021 contracts.
The ratings agency also added that the Labor Force Survey (LFS) measure of wage growth was 5.0% YoY in August. The BoC’s preferred measure i.e., quarterly earnings, hints at a 3.8% YoY increase in total hourly compensation in Q2, with a finer breakdown showing only a 2.9% rise in the business sector as compared to the longer-run average of 3.4%. However, productivity growth is running well behind wage growth, which is inconsistent with 2% inflation.
An executive of the company viewing a portfolio of investment grade municipal obligations.
Our Methodology
To list the 10 Oversold Canadian Stocks to Buy Right Now, we used the Finviz screener and online rankings to extract the Canadian companies. After getting the list of 25-30 stocks, we selected the ones trading lower than the forward P/E of ~15.0x and which have significantly declined over the past year. Finally, the list was narrowed down to the following 10 Canadian stocks and these were ranked in ascending order of their hedge fund sentiments, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Oversold Canadian Stocks to Buy Right Now
10) Electrovaya Inc. (NASDAQ:ELVA)
% Decline Over Past Year: Over 17%
Forward P/E (As of October 21): 13.97x
Number of Hedge Fund Holders: 1
Electrovaya Inc. (NASDAQ:ELVA) is engaged in the designing, developing, manufacturing, and selling of lithium-ion batteries, battery management systems, and battery-related products for energy storage, and other specialized applications in North America.
Electrovaya Inc. (NASDAQ:ELVA) has been laying the groundwork for future growth with the help of new product development and strategic partnerships. Moreover, the company has been pursuing strategic financing in a bid to support its initiatives. Electrovaya Inc. (NASDAQ:ELVA) expects its margins to improve in the upcoming quarters. The company’s strategic initiatives, which include co-development with OEM partners and progress toward strategic financing, should continue to aid its growth trajectory.
Electrovaya Inc. (NASDAQ:ELVA)’s focus on sectors such as mining and construction, together with the expected improvement in margins, places it well to potentially rebound from the deferment of orders. As the company has been navigating a competitive landscape of lithium-ion battery technology, its ability to sustain revenue and bring in new customers is expected to drive growth in the upcoming fiscal years.
Electrovaya Inc. (NASDAQ:ELVA) announced a C$2-million investment from the Government of Canada via the Federal Economic Development Agency for Southern Ontario. This funding is expected to be used to help investments in automation, Al, and capacity enhancements at the company’s Mississauga, Ontario manufacturing facility. Also, the company established a strategic supply agreement with Innovative Rail Technologies, LLC (IRT). This agreement is expected to initially cover the supply of Electrovaya Inc. (NASDAQ:ELVA)’s Infinity battery systems for IRT’s electric locomotive systems.
9) ProMIS Neurosciences, Inc. (NASDAQ:PMN)
% Decline Over Past Year: ~44%
Forward P/E (As of October 21): 4.55x
Number of Hedge Fund Holders: 1
ProMIS Neurosciences, Inc. (NASDAQ:PMN) is engaged in discovering and developing precision medicine solutions.
ProMIS Neurosciences, Inc. (NASDAQ:PMN) announced the positive top-line data from the first 4 cohorts of its first-in-human Phase 1a clinical trial of PMN310 in healthy volunteers. This was a pivotal moment for ProMIS Neurosciences, Inc. (NASDAQ:PMN) and the Alzheimer’s community which underscores the company’s progress in advancing PMN310 as a potentially transformative therapeutic option for early Alzheimer’s disease.
On 11th March 2024, the company announced that the European Patent Office, the Japanese Patent Office, and IP Australia, the Australian patent office, have allowed the composition of matter and method of use patent applications associated with ProMIS Neurosciences’ lead product candidate, PMN310, for treating Alzheimer’s disease (AD). ProMIS Neurosciences, Inc. (NASDAQ:PMN) continues to build a fortress of intellectual property protection around its novel approach to targeting toxic misfolded proteins in a bid to treat neurodegenerative diseases. Notably, the newly allowed patents are validating innovation in important geographies.
ProMIS Neurosciences, Inc. (NASDAQ:PMN) also demonstrated promising pre-clinical data at the International Conference on Cognitive & Behavioral Neurosciences, reflecting that its lead product candidate, PMN310, is expected to effectively target toxic proteins in Alzheimer’s disease. Also, the proceeds from the Private Investment in Public Equity (PIPE) financing are expected to be used to advance the clinical development of PMN310 and for working capital and other general corporate expenses.