RRSP Investors: 2 Top Oversold TSX Index Stocks to Buy in January

Here’s why Suncor Energy Inc. (TSX:SU)(NYSE:SU) and another top Canadian stock appear attractive right now.

| More on:
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn moresdf

The pullback in the TSX Index over the past few months has set investors up with a multitude of attractive stocks to consider for their self-directed RRSP portfolios.

Let’s take a look at two stocks that appear oversold today and could be rewarding picks for a retirement savings fund.

Suncor (TSX:SU)(NYSE:SU)

Suncor is down amid the broad sell-off that has hit the energy sector in Q4 2018. WTI oil prices fell from US$76 per barrel to US$44 in a matter of weeks, triggering a total meltdown.

Producers with debt problems should be avoided, but those with strong balance sheets are becoming very attractively priced. Suncor in particular is an interesting pick right now. The company’s integrated business structure provides a nice hedge against falling oil prices, as the refining and retail operations tend to perform well when oil tanks.

Troubled players in the industry become prime takeover targets for Suncor in difficult times, and the company has the firepower to acquire top-quality assets at cheap prices during a downturn.

The stock now trades at $38 per share compared to the 2018 high around $55. Production is set to increase next year, and two major development projects are now complete, putting less pressure on capital requirements. Suncor has a solid track record of dividend growth, and that trend should continue.

At the time of writing, investors can lock in a 3.8% yield and wait for the market to turn.

Further downside in the oil market simply serves up better acquisition opportunities, and at some point, oil will reverse course. When that happens, Suncor should trend back toward the recent highs.

Bank of Montreal (TSX:BMO)(NYSE:BMO)

Bank of Montreal might be the Goldilocks pick in the Canadian banking sector today. The company has a balanced revenue stream coming from commercial and personal banking, wealth management, and capital markets operations in both Canada and the United States. The U.S. business is benefitting from reduced taxes, and the weakness in the Canadian dollar compared to its U.S. counterpart means U.S. earnings provide a nice boost to profits when converted.

Bank of Montreal has low relative exposure to the Canadian housing market, so a pullback in house prices should be less problematic for the bank than it could be for a couple of its peers.

The stock is down from $108 per share in September to below $90. This puts the price-to-earnings multiple at a reasonable 11 times trailing 12-months profits. Dividend growth should continue and the current payout provides a yield of 4.5%.

The bottom line

Investors finally have a chance to pick up some bargains for their self-directed RRSP portfolios. At current prices, Suncor and Bank of Montreal should be solid buy-and-hold picks.

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 Andrew Walker has no position in any stock mentioned.

More on Investing

Investing

KM Throwaway Post

Read more »

Investing

Carlos Test Yoast Metadata

Read more »

Investing

KM Ad Test

This is my excerpt.

Read more »

Investing

Test post for affiliate partner mockups

Updated: 9/17/2024. This post was not sponsored. The views and opinions expressed in this review are purely those of the…

Read more »

Investing

Testing Ecap Error

Premium content from Motley Fool Stock Advisor We here at Motley Fool Stock Advisor believe investors should own at least…

Read more »

Investing

TSX Today: Testing the Ad for James

la la la dee dah.

Read more »

Lady holding remote control pointed towards a TV
Investing

2 Streaming Stocks to Buy Now and 1 to Run From

There are streaming stocks on the TSX that are worth paying attention to in 2023 and beyond.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Stocks for Beginners

Top Recession-Resilient TSX Stocks to Buy With $3,000

It's time to increase your exposure to defensives!

Read more »