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.
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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.
8) Lithium Americas (Argentina) Corp. (NYSE:LAAC)
% Decline Over Past Year: ~39%
Forward P/E (As of October 21): 13.47x
Number of Hedge Fund Holders: 8
Headquartered in Vancouver, Canada, Lithium Americas (Argentina) Corp. (NYSE:LAAC) is engaged in providing specialty products essential to low-carbon economies and achieving global net-zero greenhouse gas (GHG) emissions.
Lithium Americas (Argentina) Corp. (NYSE:LAAC)’s strategic priorities focus on the successful ramp-up of production at the Cauchari-Olaroz project, achieving full capitalization, and accelerating regional development plans in collaboration with its partner, Ganfeng Lithium. Market experts believe that the Cauchari-Olaroz project, which is located in Argentina, is Lithium Americas (Argentina) Corp. (NYSE:LAAC)’s most important asset and is central to the growth strategy.
This JV is focused on capitalizing on the elevated global demand for lithium, fueled by the expanding EV market and the growing need for energy storage solutions. As of mid-2024, Lithium Americas (Argentina) Corp. (NYSE:LAAC)’s goals consist of running the plant to identify critical issues and then scaling back operations in a bid to focus on quality and reliability. Post this, it plans to implement process and equipment improvements before it ramps up production again.
The success of Lithium Americas (Argentina) Corp. (NYSE:LAAC) revolves around its ability to ramp up production efficiently while, at the same time, securing favorable offtake agreements amidst competition. Wall Street analysts expect a recovery in lithium prices in the medium term, which should benefit Lithium Americas (Argentina) Corp. (NYSE:LAAC) as it increases production volumes. Reaching full production capacity is expected to result in substantial improvements in financial performance.
Notably, increased production volumes, along with the expected recovery in lithium prices, should fuel Lithium Americas (Argentina) Corp. (NYSE:LAAC)’s revenue growth and margin expansion. This will result in achieving positive earnings and cash flow, improving financial stability, and reducing its dependency on external funding.
7) TELUS International (Cda) Inc. (NYSE:TIXT)
% Decline Over Past Year: ~42%
Forward P/E (As of October 21): 6.69x
Number of Hedge Fund Holders: 9
TELUS International (Cda) Inc. (NYSE:TIXT) is engaged in designing, building, and delivering digital solutions for customer experience (CX) in the Asia-Pacific, Central America, Europe, Africa, North America, and internationally. TELUS International (Cda) Inc. (NYSE:TIXT), rebranding to TELUS Digital Experience later in Q3 2024, remains at the forefront of digitally transforming customer journeys.
Wall Street analysts believe that a recovery in IT spending is expected to materialize in the latter half of 2024, which should provide a boost to TELUS International (Cda) Inc. (NYSE:TIXT) ‘s performance. As and when organizations increase or resume their technology investments, the company might see an uptick in demand for its services. This should lead to strong revenue growth, better utilization rates, and potentially healthy pricing power.
The recovery in spending is expected to allow TELUS International (Cda) Inc. (NYSE:TIXT) to expand its customer base and deepen relationships with existing clients, resulting in larger, more profitable contracts. Together with good momentum with its 2 largest clients, TELUS Corporation and Google, the company saw stabilization in revenue with its third largest client, a leading social media network.
In another fundamental shift, TELUS International (Cda) Inc. (NYSE:TIXT) continues to grow its AI-related business, generating ~15% of the overall revenue in H1 2024, increasing 13% YoY. The company highlighted that AI-related opportunities make up ~10% of its overall sales funnel. For FY 2024, the company expects revenues of between $2,610 million – $2,665 million and adjusted diluted EPS of $0.39 – $0.44.
6) Canadian Solar Inc. (NASDAQ:CSIQ)
% Decline Over Past Year: ~39%
Forward P/E (As of October 21): 3.59x
Number of Hedge Fund Holders: 10
Canadian Solar Inc. (NASDAQ:CSIQ) offers solar energy and battery energy storage products and solutions in Asia, the Americas, Europe, and internationally.
Canadian Solar Inc. (NASDAQ:CSIQ)’s growing presence in both module production and energy storage solutions is expected to drive long-term growth in the challenging environment. Market players are quite optimistic about the company’s energy storage business due to the high margins and robust demand in this domain.
The expansion of US manufacturing capabilities should also help Canadian Solar Inc. (NASDAQ:CSIQ) achieve healthy growth moving forward.
This expansion is expected to help it navigate potential trade barriers and capitalize on local market opportunities. By increasing local production, it will be better positioned to navigate trade barriers and tariffs. This should help in reducing the impact of protectionist measures on its business. The demand for solar energy is being fueled by the expansion of Al-driven data centers, EVs, and other emerging technologies.
Canadian Solar Inc. (NASDAQ:CSIQ) has a strong position in the global solar market, courtesy of its diverse product portfolio and extensive project pipeline. This forms the base for future growth and revenue generation. The company’s strong emphasis on energy storage and expansion into US manufacturing should help it differentiate from competitors and strengthen its market position. Canadian Solar Inc. (NASDAQ:CSIQ)’s diversified business model and commitment to sustainability places it well for future growth.
The company expects a stronger H2 2024, particularly for its energy storage segment. It also projects that a healthy margin in the US module market should continue through Q3 and Q4. Moreover, strong performance in e-STORAGE is expected to lead to a robust Q4 2024.
5) Obsidian Energy Ltd. (NYSE:OBE)
% Decline Over Past Year: ~30%
Forward P/E (As of October 21): 3.81x
Number of Hedge Fund Holders: 11
Obsidian Energy Ltd. (NYSE:OBE) is engaged in the exploration, production, and development of oil and natural gas properties in Western Canada.
Obsidian Energy Ltd. (NYSE:OBE)’s operational success stems from its innovative approach to drilling. It has implemented a new “waffle design” in the drilling operations, primarily in the Bluesky Formation. The success of the waffle design drilling is expected to drive long-term growth for the company. It can be a potential game-changer for Obsidian Energy Ltd. (NYSE:OBE)’s long-term production capabilities and efficiency.
Through higher initial production rates and faster payout times, Obsidian Energy Ltd. (NYSE:OBE) continues to position itself to generate robust cash flows and returns on investment. This operational efficiency should give the company a competitive edge in the industry where margins can be tight and commodity prices are volatile. Wall Street analysts opine that the company’s clear strategic direction, financial health, and potential for production growth are expected to act as tailwinds. The success of Obsidian Energy Ltd. (NYSE:OBE)’s innovative drilling techniques offers a robust foundation for growth.
While the company remains optimistic about the waffle design drilling technique, industry experts believe that this will enable the company to extract more value from its existing land holdings. This will eventually lead to increased reserves and will extend the productive life of its assets. If Obsidian Energy Ltd. (NYSE:OBE) can consistently replicate the exceptional results that were seen in the Bluesky formation throughout its asset base, it can result in sustained increases in production rates and operational efficiency.
4) Vermilion Energy Inc. (NYSE:VET)
% Decline Over Past Year: ~33%
Forward P/E (As of October 21): 9.70x
Number of Hedge Fund Holders: 16
Vermilion Energy Inc. (NYSE:VET) is engaged in the acquisition, exploration, development, and production of petroleum and natural gas.
Vermilion Energy Inc. (NYSE:VET) achieved some key operational milestones, which include the startup of the Mica Montney battery in British Columbia and the SA-10 gas plant in Croatia. The company highlighted that new gas production in Croatia gets support from stronger natural gas prices, selling at a premium to other European benchmarks. In the recent earnings call, Vermilion Energy Inc. (NYSE:VET) highlighted that its focus was on strategic growth assets.
Wall Street analysts expect that the company’s diversified portfolio, mainly its exposure to premium-priced European gas, should continue to strengthen its financial position moving forward despite challenges. In Germany, Vermilion Energy Inc. (NYSE:VET) completed its testing operations for the first deep gas exploration well drilled. The well was completed in the Rotliegend zone at a depth of ~5,000 meters and flow tested at a restricted rate of 17 mmcf/d(1) of natural gas with a wellhead pressure of 4,625 psi.
Considering the high-pressure reading, Vermilion Energy Inc. (NYSE:VET) expects that deliverability would have been higher without testing equipment limitations. On a positive note, these results validate the company’s initial assessment of the reservoir. Vermilion Energy Inc. (NYSE:VET) went on to say that tie-in operations are progressing and the focus is on bringing the well into production in H1 2025.
In Croatia, Vermilion Energy Inc. (NYSE:VET) successfully increased production on the SA-10 block after the commissioning of a gas plant in late June 2024.
3) Magna International Inc. (NYSE:MGA)
% Decline Over Past Year: ~18%
Forward P/E (As of October 21): 6.61x
Number of Hedge Fund Holders: 16
Magna International Inc. (NYSE:MGA) is engaged in designing, engineering, and manufacturing components, assemblies, systems, and modules for original equipment manufacturers of vehicles and light trucks.
Magna International Inc. (NYSE:MGA) has been tightening its adjusted EBIT margin range for 2024 and remains focused on addressing market changes, targeting continued margin expansion and robust FCF by 2026. Market experts believe that operational excellence activities should contribute to margin expansion. Magna International Inc. (NYSE:MGA) has been restructuring its complete vehicle cost base and has plans to reduce engineering spend. Therefore, it expects strong FCF and margin expansion for 2026 amidst challenges.
Magna International Inc. (NYSE:MGA) has been exploring opportunities to offset the impact of declining EV programs. It is going for a conservative approach to EV programs in North America based on historical data and judgment. While Magna International Inc. (NYSE:MGA) remains optimistic about its value proposition with Chinese automakers expanding globally, it remains committed to maintaining a leverage ratio and will consider share buybacks post addressing balance sheet commitments.
Magna International Inc. (NYSE:MGA)’s proactive measures in the face of the evolving EV market and its commitment to operational excellence and capital discipline place it well to tackle current uncertainties. For FY 2024, the company expects an adjusted EBIT margin of 5.4% – 5.8% and an adjusted net income of $1.5 billion – $1.7 billion. Aristotle Capital Management, LLC, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:
“Magna International Inc. (NYSE:MGA), a Canada‐based global auto parts, systems and assembly company, was one of the largest detractors for the period. The company lowered its 2024 sales guidance, having seen a slowdown in electric vehicle (EV) adoption across its customer base and expecting a halt in Fisker Ocean production. Despite concerns over automakers delaying EV rollouts, we continue to believe in the longer-term investment catalysts for Magna. These include the company’s ability to enhance margins from operational improvements and leverage its distinctive capabilities to supply parts for an increasingly electrified and autonomous fleet of vehicles. Magna specializes in lightweighting—a necessity for heavy internal combustion engines and electric vehicles—and has made years of investments in self-driving technologies. In addition, with leading market share positions in many of its core markets and products, we believe Magna remains well positioned to benefit as content‐per‐ vehicle increases and automotive parts and systems become more complex.”
2) Baytex Energy Corp. (NYSE:BTE)
% Decline Over Past Year: ~34%
Forward P/E (As of October 21): 9.87x
Number of Hedge Fund Holders: 17
Baytex Energy Corp. (NYSE:BTE) is an energy company, that is engaged in the acquisition, development, and production of crude oil and natural gas in the Western Canadian Sedimentary Basin and the Eagle Ford, the US.
Baytex Energy Corp. (NYSE:BTE) remains confident in the Duvernay asset and plans to increase capital allocation. Eagle Ford play’s move to the black oil window is anticipated to yield lower well costs and better oil cuts. The company saw efficiency gains in the recent quarter, with a reduction in drilling days and costs in the Duvernay play. Baytex Energy Corp. (NYSE:BTE) took advantage of favorable market conditions in a bid to improve debt terms and extend the credit facility. The company has been evaluating and prioritizing the highest-returning assets in its portfolio.
Market experts opine that Baytex Energy Corp. (NYSE:BTE)’s strategic focus on balance sheet strength and shareholder returns, together with operational efficiencies and potential developments in the asset portfolio, places it for continued growth and profitability amidst the competitive energy market. The company’s strong ability to maintain profitability despite the fluctuating oil and gas market should help it navigate a tough economic environment.
As Baytex Energy Corp. (NYSE:BTE) continues to execute its plans for 2024, the FCF is expected to strengthen in H2 2024. This should enable the company for higher shareholder returns and debt reduction.
The company’s Q2 2024 results were aided by increased production, disciplined capital spending, and meaningful FCF. Baytex Energy Corp. (NYSE:BTE) returned $97 million to shareholders via its share buyback program and quarterly dividend.
1) Veren Inc. (NYSE:VRN)
% Decline Over Past Year: ~25%
Forward P/E (As of October 21): 8.01x
Number of Hedge Fund Holders: 26
Veren Inc. (NYSE:VRN) is engaged in exploring, developing, and producing oil and gas properties in Canada and the United States.
One of the key factors helping Veren Inc. (NYSE:VRN)’s success revolves around its use of advanced drilling and completion techniques. The company continues to implement higher intensity ‘elevator’ fracs, which should materially improve future profitability. Market experts opine that these advanced fracking techniques can enhance the value of the company’s undrilled land, potentially resulting in multiple expansion.
The adoption of such innovative technologies should help Veren Inc. (NYSE:VRN) improve its current production and place it well for future growth. With the company’s focus on refining and optimizing these techniques, it can see further improvements in well performance and economic returns. As Veren Inc. (NYSE:VRN) has been refining its operations and is benefiting from rapid well payouts, significant improvement in future profitability is expected.
Considering its success in the Montney formation, Veren Inc. (NYSE:VRN) now has opportunities to expand its operations, either through the acquisition of new acreage or by partnering with other companies to establish additional resources. Moreover, the company’s demonstrated ability to implement advanced drilling and completion techniques places it favorably to exploit future technological advancements in the broader industry.
Veren Inc. (NYSE:VRN) announced it has entered into a strategic long-term partnership with Pembina Gas Infrastructure associated with certain infrastructure assets in Alberta Montney. The company will receive net cash proceeds of $400 million related to this transaction. It is gaining operatorship of additional oil battery sites, which will enhance efficiencies and reduce operating costs.
While we acknowledge the potential of VRN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than VRN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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