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Trade war fears are setting the stage for yet another bear market scenario, which could come to fruition over the next few months. The S&P 500 is already back into correction territory just over a month after plunging ~10% from peak to trough. At this point, trade war fears are overpowering the fundamentals behind individual businesses.
We’re experiencing a liquidation of stocks across the market; every piece of merchandise is being marked down, whether it’s warranted or not. Investors are dumping all stocks, as they fear the fallout from Trump’s tariffs could put the bull market on life support. Moreover, we’ve entered what appears to be an extremely volatile market that’s being moved primarily by the emotions of investors, creating buying opportunities for disciplined contrarians with the ability to keep their cool in times of panic.
Market crashes are opportunities for those who are greedy while others are fearful
For investors nearing retirement, crashes can hit where it hurts; however, for young investors, market crashes are actually a good thing, assuming they’ve got the cash to take advantage of sales. It’s a chance to put their money to work as the markets reset.
I know many young investors who are hoarding cash, waiting for the next market crash to get started in investing. While it may seem like a safe approach, speculating on such an event happening could cause one to surrender one of their biggest advantages: time.
Instead of playing one side of the coin, a better decision would be to play both sides. Invest a percentage of capital as soon as possible, while keeping ample cash on the sidelines to finance your correction shopping list once the time arrives. Don’t bother forecasting when the next crash will happen; nobody can do this. Just be ready for whatever the market throws at you. By hedging, you’ll know exactly what you’ll need to do when stocks head south.
Some of the biggest bargains exist today!
The best part of broader market sell-offs is that many stocks are unfairly beaten up, and you can lock in high-quality premium stocks at bargain-basement prices!
Canadian National Railway (TSX:CNR)(NYSE:CNI) and Alimentation Couche-Tard Inc. (TSX:ATD.B) are two long-term earnings-growth kings that are among the best deals as the TSX inches closer to correction territory.
These are rock-solid businesses that have had their fair share of short-term issues; however, the negative market sentiment has severely exacerbated their respective falls.
Couche -ard is expected to experience ~30% in EPS growth over the medium term, and it trades at a 18.4 trailing price-to-earnings (P/E) multiple, a 3.4 price-to-book (P/B) multiple, a 0.5 price-to-sales (P/S) multiple, and a 12.4 price-to-cash flow (P/CF) multiple, all of which are lower than the company’s five-year historical average multiples of 21.9, 4.6, 0.6, and 14.3, respectively.
Make no mistake, Couche-Tard is still a growth stock. It’s just priced as a value stock, so with this in consideration, shares are an absolute steal at these levels. The stock is currently down 16% from its 52-week high and presents a very compelling long-term opportunity for investors.
CN Rail is a proven long-term market beater and one of the best dividend aristocrats in all of North America. The stock trades at a 12.5 trailing P/E, a 4.1 P/B, and a 12.8 P/CF, all of which are lower than the company’s five-year historical average multiples of 19.5, 4.4, and 13.6, respectively. You’re getting one of the widest-moat earnings-growth stars at a massive discount to its intrinsic value.
The opportunity is here and now. Although each stock could get cheaper, you should consider using part of your correction shopping list budget today with the intent of doing more buying if the markets bleed more over the next few months. By spreading your buying activity at different depths of a market-wide decline, you won’t be “timing” a bottom, which rarely ever works, since we all know there’s no bell that goes off when this happens.
By waiting for things to get worse, you’ll always be hesitant to pull the trigger, and next thing you know, the dip will be gone, leaving you empty handed after one of the biggest sales in recent memory.
Do your portfolio a favour right now and pick up these bargains while they last. And stop telling yourself you’re waiting for a bottom, because it’s possible that the bottom could already be here.
Stay hungry. Stay Foolish.
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Fool contributor Joey Frenette owns shares of ALIMENTATION COUCHE-TARD INC and Canadian National Railway. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. Alimentation Couche-Tard and Canadian National Railway are recommendations of Stock Advisor Canada.