The coronavirus pandemic has had investors sweating over their declining portfolio value. However, for contrarian and value investors, this bear market provides an opportunity to buy high-quality stocks at a lower valuation.
Here, we look at three such companies on the TSX that can rebound quickly once normalcy is restored in terms of consumer demand and consumption.
Fiera Capital
Shares of Fiera Capital (TSX: FSZ) are trading at $5.91 which is 55% below its 52-week high. This Canada-based financial services company provides advisory solutions to retail investors, institutional investors and private wealth clients.
As investors and institutional clients have sold-off a large portion of their investments, Fiera Capital will report a revenue decline in 2020. According to analyst estimates, the company is expected to report a 4.5% decline in sales and a 17.2% fall in earnings for 2020.
At the close of the December quarter, Fiera had close to $170 billion in assets under management but this is likely to reduce in the upcoming quarters as investors are likely to wait and watch in a market that is largely volatile and uncertain. For 2021, analysts have revised revenue estimates lower from $774 million to $657 million.
With a dividend of $0.84 per share, Fiera’s forward yield stands at a juicy 14.2%, which means an investment of $10,000 in the stock will result in yearly dividend payments of $1,420.
Alaris Royalty
Another financial services stock that has grossly underperformed the bear market is Alaris Royalty (TSX:AD). The stock is trading at $7.86, which is 66% below its 52-week high.
Alaris provides equity financing to companies in North America. These investments are in the form of preferred limited partnership interests, or long-term lease and licensing agreements.
Alaris primarily invests in steady growth companies and the stock has been pummelled on macro concerns over an economic slowdown that will have a considerable impact on the company’s its top line.
Analysts expect Alaris sales to fall from $116 million in 2019 to $107 million in 2020. Comparatively, its earnings might fall by 38% this year to $1.38. This indicates the stock is trading at a forward price to earnings multiple of 5.7.
With a dividend yield of a massive 21%, Alaris is one of the top bets for income and contrarian investors.
Goeasy
Shares of Goeasy (TSX: GSY) are trading at $36.9, which is 54% below its 52-week high. The company is engaged in providing loans and related financial services to consumers. Its easyhome business segment provides home appliances under weekly or monthly leasing agreements, while the easyfinancial segment provides consumer installment loans.
The upcoming slowdown in the Canadian economy will have a direct impact on company revenue. Further, there is a chance of delinquencies if the unemployment rate increases and the Canadian economy is thrown into a recession.
However, Goeasy has been a solid bet for investors over the long-term. It has gained 76% in the last five years despite a 60% decline in the last month. Currently, analysts expect the company to increase sales by 16% to $707.3 million in 2020 and 7.5% to $760.1 million in 2021.
Comparatively, Goeasy’s earnings could rise by 33.3% this year and 25% in 2021. Compare these growth rates to its forward price-to-earnings ratio of six and a forward yield of 4.9%, we can see that the stock is trading at an attractive valuation.
