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TSX Stocks: 1 to Buy, 1 to Hold, and 1 to Sell – The Motley Fool Canada

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The situation in the markets these days is creating a lot of opportunities for long-term investors. Plenty of TSX stocks remain undervalued, even in the current economic situation.

It’s important to choose stocks with solid underlying businesses. However, it’s also equally as important to find businesses in industries that are seeing little or no impact from the coronavirus.

You also want to focus on the high-quality stocks that are the most undervalued. It is true that long-term investors should be able to buy high-quality stocks at any price. In theory, if they are high-quality, then over the long term, the stocks will appreciate anyway.

However, with so many great stocks trading at such massive discounts, the opportunity cost of not investing in the most undervalued companies could be substantial.

So, without further ado, here’s one stock to buy, one to hold, and one to avoid.

A TSX stock to buy

One of the top value stocks on the TSX today has to be Corus Entertainment (TSX:CJR.B).

I wrote about Corus a few months ago, back when the TSX stock was trading at just $2.70. Since then, it has skyrocketed by more than 35%, yet the stock is still extremely cheap.

Currently, Corus trades at a trailing price-to-earnings ratio of just 4.2 times. The stock has been oversold over fears that the impact of reduced advertising would result in a big hit to Corus’s bottom line.

Back at the last earnings report, management wanted to take a wait-and-see approach. So, the decision was made to let things play out before declaring the June dividend.

And since management went ahead and issued the dividend, it’s likely that whatever impact on business Corus has seen, has probably only been minor.

A TSX stock to hold

Another great stock on the TSX is Pizza Pizza Royalty (TSX:PZA).

Pizza Pizza is a high-quality income stock and one of the most defensive investments in the restaurant space. While a number of its peers have had to suspend their dividend completely, Pizza Pizza only had to trim its dividend slightly.

The move came after stay-at-home orders saw its walk-in sales (which account for roughly 35% of sales) drop off almost completely.

Pizza Pizza’s management took the prudent steps to trim the dividend by 30%. While this is only a minor cut compared to its peers, for Pizza Pizza itself, the move was actually more than needed and very conservative, which will help the company to build its cash reserve and better manage in the ongoing pandemic.

Investors have liked what they’ve seen, and the stock now trades just over 10% off its pre-pandemic price.

In my view, this represents full value and not much upside left in the current environment. However, if you owned the stock, I would still hold it, as it continues to pay out an attractive 6.9% dividend.

A stock to avoid

The one stock I would caution investors to avoid is Air Canada (TSX:AC).

The airline industry has been hit hard, and there doesn’t look like any relief is coming soon. Keeping travel limited and borders closed to non-essential travel is one of the easiest ways to slow the spread of coronavirus.

For this reason, I tend to agree with Warren Buffett and think it could be years before airlines reach the record capacity they had in 2019.

That doesn’t mean the stock won’t appreciate in the short run, as speculation grows with the market. However, if you are a long-term investor, I wouldn’t count on a rebound in Air Canada anytime soon.

So, in short, I’d avoid the stock for two reasons. First, there is still way too much uncertainty in the airline industry, in my view. And second, with so many other top TSX stocks (with considerably fewer headwinds) trading for so cheap, there are much better places to invest your cash today.

Regardless of the shares being down 65% from its highs, if it continues to see little to no capacity, the stock could come crashing down again soon.

Bottom line

It’s not enough just to buy TSX stocks when they are undervalued. Investors also need to understand the business as well as the industry to get a holistic view of the investment they are making.

Here are five more cheap TSX stocks that are buys today.

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Fool contributor Daniel Da Costa owns shares of CORUS ENTERTAINMENT INC., CL.B, NV. The Motley Fool owns shares of PIZZA PIZZA ROYALTY CORP.

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

The Canadian Press. All rights reserved.

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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