I know you’re hearing it everywhere, but I just want to remind everyone what a massive buying opportunity this market crash is. You’ll likely have to wait years for a better time to put cash to work.
I’m the first to admit the short term looks bleak. That’s exactly why this market crash happened, after all. The long term, however, looks much better. Governments around the world are poised to help out consumers with short-term liquidity issues and make sure depressed businesses can make payroll. This stimulus, combined with effective social-distancing techniques, should ensure the economy bounces back faster than most expect.
Although I have no idea when the bottom will be, I do know stocks are currently very cheap. It’s a generational buying opportunity for many sectors that have been beaten down by the market crash. Let’s look at three different companies I think are absolute screaming buyS today. In fact, I’ve even added these companies to my portfolio recently.
Royal Bank of Canada
It seems like Royal Bank dominates everything it touches. Its domestic banking operations have the highest market share in Canada. More Canadians bank with Royal Bank than anywhere else. This translates into solid mortgage growth, good results from wealth management, and impressive insurance operations. Royal Bank’s capital markets division is also one of the best in the business, and we can’t discount its operations in the United States or the Caribbean.
What makes Royal Bank an excellent buy during this market crash is its suddenly reasonable valuation. After years of trading at a high price-to-earnings multiple, Royal Bank’s P/E ratio has dropped to just 8.7 times. The dividend yield is also much higher than normal; Royal Bank shares yield 5.5%.
If you think Royal Bank’s 25% sell-off has been a big story during this market crash, you’ll want to check out Canada’s REIT sector. Many high-quality names are off 50%.
RioCan REIT (TSX:REI.UN) is one of the best in the sector. It has smart management, good assets located in major cities, and a conservative balance sheet. Much of the rent from its 220 property retail and mixed-use portfolio comes from major grocers and other solid retailers, companies that are handling this market crash just fine. Sure, some of the other tenants will be affected, but I’m confident RioCan will make it through this crisis.
Meanwhile, the company’s development pipeline should boost profitability in the future. Financing has been secured for these projects, and construction will continue. These are big projects, too. The Well, which is RioCan’s marquee development in downtown Toronto, will feature 1.1 million square feet of office space, 500,000 square feet of retail, and some 1,800 apartments.
In the meantime, the market crash has nicely elevated RioCan’s yield. The current payout is more than 10%.
Yes, I’m the first to admit coronavirus-related costs will be an issue in the short term. Life insurance payouts will be elevated, and many folks will make heavy use of their workplace benefits over the next few months. Investors are also concerned about results from Asia, which has been the company’s big growth driver over the last few years.
But this is an excellent overall business that now trades at a bargain price. Manulife earned $2.78 per share in 2019. Shares trade hands at around $15 each as I write this. That’s a P/E ratio of just over five times. The stock also trades at a substantial discount to its book value, meaning investors are valuing the company’s brand at nothing.
And like the other stocks on this list, you get paid a fantastic dividend while you wait for the stock to come back. The yield is currently 7.5%.
The bottom line on these market crash stocks
Don’t overthink it. This market crash has given you the opportunity to buy some of Canada’s best stocks on sale. Forget about trying to time the bottom of the market and seize this opportunity. You’ll be glad you did.
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Fool contributor Nelson Smith owns shares of Royal Bank of Canada, RIOCAN REAL EST UN, and Manulife Financial.