Two Canadian stocks offer value plays for long-term investors despite market gains

The Toronto Stock Exchange has climbed 15 percent so far this year, but that doesn't mean the bargains have disappeared. If you know where to look, there are still quality Canadian companies trading at prices that don't reflect their actual worth—stocks that have stumbled in 2021 even as they've delivered outsized returns over the longer haul.

The pandemic created a particular kind of chaos in the markets. Some of the country's strongest businesses saw their share prices hammered during the worst of it, and even as the recovery has taken hold, not all of them have fully rebounded. For investors with a five-year or ten-year horizon, this gap between what the market is paying today and what these companies might be worth tomorrow represents real opportunity. The trick is finding the companies that have already proven themselves over time.

Brookfield Renewable Partners stands out as one such candidate. The $14 billion company is a global leader in renewable energy, not just in Canada but across multiple continents, serving customers with a diverse portfolio of clean power solutions. The stock has fallen 10 percent year to date and sits roughly 20 percent below its all-time high. That's the kind of pullback that can look like a gift to a patient investor, especially in a sector that has lagged the broader market's gains this year. Yet shareholders who held the stock over the past five years have seen their money nearly triple, gaining 140 percent. The renewable energy space is still in its growth phase, and Brookfield Renewable Partners remains one of the cleanest ways to gain exposure to that shift.

Kinaxis tells a different kind of story, though one with similar bones. The software company specializes in supply chain management—the kind of unglamorous but essential infrastructure that keeps goods moving from factory to shelf. When the pandemic hit, consumer behavior shifted overnight, and suddenly Kinaxis's tools became indispensable. Businesses scrambled to understand and respond to the new patterns of demand, and Kinaxis's platform let them do it. The stock doubled in just over three months as that demand became clear. Year to date, Kinaxis has gained only 5 percent, but it's been on a 40 percent run since early June, suggesting the market may be catching up to its potential.

The volatility in Kinaxis shares is real. Over the past five years, the ride has been bumpy. But those who stayed aboard have been rewarded with a 215 percent return since mid-2016—a gain that far outpaces the market. The stock is expensive by conventional measures, trading at a price-to-sales ratio above 20, which puts it in line with other high-growth tech companies but well above the broader market average. That premium valuation is the trade-off investors make when they buy a growth stock. The question is whether the company's ability to deliver market-beating returns justifies the price tag. For those betting on continued digitalization of supply chains and the ongoing complexity of global commerce, the answer appears to be yes.

Both stocks have stumbled relative to the market in 2021, but both have proven their mettle over longer periods. The renewable energy sector is still in its infancy, and supply chain software is becoming more critical, not less. For investors willing to think in years rather than months, these two companies offer the kind of entry points that don't come around every day.