Insider Monkey
10 Oversold Canadian Stocks To Buy
Ramish Cheema
8 min read

In This Article:

In this piece, we will take a look at ten oversold Canadian stocks to buy. If you want to skip an introduction to the Canadian economy and the stock market, then take a look at 5 Oversold Canadian Stocks To Buy.

Canada and the U.S. are tightly interlinked. The countries have a nearly two centuries-old relationship. The US and Canada are strong trading partners, with Canada being America's largest trading partner as of 2021 end.

This close relationship between the two countries also leads to several Canadian firms seeking to take advantage of America's lucrative capital markets and raising equity capital by selling shares on exchanges such as the New York Stock Exchange (NYSE) and the NASDAQ. More than two hundred Canadian firms are listed on both the Toronto Stock Exchange (the ten biggest stock exchange in the world and the third biggest in North America as of January 2023) and the NYSE and NASDAQ. This figure has grown significantly since data from the Bank of Canada shows that twenty years back, in 2003, 181 Canadian firms had listed their shares on U.S. exchanges, which itself had marked 100% growth over the previous two decades. According to the bank, some of the benefits to investors of Canadian firms from listing on U.S. exchanges include a broader risk base as more investors share it and reduced transactional costs due to greater liquidity.

When we look at the number of total companies that are listed on the NASDAQ and the NYSE, it would appear that perhaps more Canadian firms should be selling their shares in America. After all, there are more than two thousand firms that have listed their shares on the NASDAQ, so the Canadian share of the total pie is nevertheless quite small. This is due to several factors such as different reporting requirements for Canadian firms (for instance, Canadian firms are mandated to publish earnings reports in IFRS) which can lead to two balance sheets and a less diversified economy that with fewer sectors with large companies.

As opposed to the U.S., where technology is the king of the stock market, in Canada, some of the largest firms are in traditional sectors such as finance, energy, and industrial segments. While America's stock markets are dominated by well known household name firms such as Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), most people are unlikely to know which is the biggest Canadian company in terms of market capitalization.

Shifting gears and taking a look at what's happening at the other side of the border, like most other countries, Canada too is battling the bane of high inflation. The overall annual inflation rate in the country stood at 2.8% as of June 2023, marking a 0.6% decrease over the figures in May. This drop was fueled primarily by a 16% reduction in energy prices. Canada exports copious amounts of oil, a drop in global energy prices also benefits the country since a large portion of its refining needs are also met by imports. However, while energy costs dropped, consumers still continued to feel the inflationary heat, as grocery prices and mortgage interest costs jumped significantly as well. Data from Statistics Canada shows that in June, groceries were up by 9.1%, marking a ten basis point increase over May's reading. Bakery products were the worst offenders as their prices grew by 12.9% in May while fresh fruits jumped by 10.4%. However, the high interest rate environment, which has seen Bank of Canada raise interest rates to 4.75%, has made its impact on mortgage interest payments as they grew by 30% in June.

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