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March has been a wild month for TSX stocks so far. Essentially the TSX index has given up all gains made in early 2023 and we are back on par.
Canadian banks make up a large portion of the TSX index. The TSX60 consists of several major financial players (think RBC, TD, Brookfield, etc.). Concerns about contagion from fallout from Silicon Valley Bank have put significant pressure on these financial stocks.
Energy stocks make up around 10% of the TSX index. They have retreated in earnest amid fears that a recession will lead to a drop in energy demand.
Buy TSX shares for the long term when the market is nervous
While recent market drama may be a bit scary, it could also be an opportunity. Acclaimed investor Michael Burry (who predicted the massive bank failure of 2008-2009) recently believed this would be short-lived.
The good news is that when the overall market falls, high-quality companies are dragged down as well. Savvy investors who aren’t afraid of the drama can buy great companies at better valuations.
If you have a few $1,000 to invest, this could be an attractive opportunity if you can invest with a long-term mindset (five years or more). Here are two TSX stocks that might be of interest today.
Brookfield Asset Management: A TSX stock for income and growth
Brookfield Wealth Management (TSX:BAM) stock is down 11% over the last month. This is the latest fork of Brookfield Corporation. This is a very interesting income stock for several reasons.
First, Brookfield is a leading manager of alternative funds and investments. These are diversified across real estate, infrastructure, renewable energy, credit, insurance and private equity. The current capital dislocations could create great opportunities to acquire assets for cents on the dollar (particularly for its credit department).
Second, the company has no debt and is poor in assets. It just collects a very stable and predictable stream of income from the assets it manages. Based on current and future funds alone, the company has already secured about 15-20% annual earnings growth for the next several years.
This TSX stock is currently yielding 4%. It is planned to pay out around 90% of the earnings. As earnings rise, the dividend will likely continue to rise. For income lovers, this could be an attractive buying opportunity.
Canadian Natural Resources: A premier energy stock over the long term
Oil prices retreated recently on global economic concerns. Oil is trading at its lowest price since late 2021. While this bodes ill for TSX energy stocks, it could be a buying opportunity for investors who can afford a little more volatility and risk.
Canadian Natural Resources (TSX:CNQ) stock is down 11% since March. With over a million barrels of oil and gas produced per day, it is one of Canada’s largest energy producers. CNQ is also one of Canada’s most efficient and well-managed energy companies.
It has over 30 years of energy reserves. It can produce this energy at a very low cost (it’s a positive cash flow of between $30 and $40 per barrel). This provides its significant operational and financial flexibility.
Today, this TSX stock is yielding 4.9%. It was a great dividend growth stock. Given the very strong balance sheet, this should continue.
While energy demand could fall temporarily, there is a long-term production deficit that should keep prices high in the near term. If you can be patient and buy in the face of the sale, this quality income stock could pay off.
