Canada’s equity market continues to trade in the red. In the first quarter of 2020, the iShares S&P/TSX 60 Index ETF, the most liquid fund in the country, fell close to 20% and is currently trading 25% below record highs.
Several stocks have moved lower, and today we look at three TSX stocks that have lost over 50% in market cap, making them attractive to the contrarian investor.
A mid-cap investment company
Shares of CI Financial (TSX: CIX) are currently trading at $12.46, which is 51% below its 52-week high of $25.81. This company offers global asset management and wealth management services. As investors are spooked over the impact of the COVID-19 on the global economy and equity markets, they have withdrawn funds at a rapid pace.
CI Financial’s asset under management (AUM) fell by 3.4% in the month of February to $176.9 billion, falling close to 12% to $155.9 billion in the month of March 2020. The market uncertainty has resulted in higher redemptions, which is likely to impact the company’s top line in the near-term.
The equity markets are expected to be volatile in the upcoming months, which means most investors will be wary of investing in these turbulent times. Several investors are also abandoning high-cost mutual funds — a key revenue generator for the company.
However, the downturn provides CI with an opportunity to acquire smaller wealth management firms at attractive prices. Further, the pullback has increased the company’s forward yield to 5.8%, which is attractive to the income investor.
A box-office bet
Movie theatres are one of the worst-hit businesses amid the COVID-19 pandemic. People are advised to stay at home and avoid large public gatherings, driving shares of Cineplex (TSX: CGX) lower by 66% in less than two months.
Last month, Cineplex announced the temporary closure of its network of movie theatres, which includes entertainment avenues such as the Rec Room and Playdium. The closure of business operations has, as expected, driven the stock to multi-year lows, completely decimating investor wealth.
Several senior executives have agreed to take pay cuts and the company also announced the layoffs of temporary workers.
In late 2019, shares of Cineplex surged on the news that it would be acquired by Cineworld for $2.1 billion. The acquisition deal will be put on hold at least in the near future given the circumstances.
Cineplex stock might gain steam and surge ahead once lockdown restrictions are removed. There could also be a temporary rise in customer footfalls as people would want to socialize after a lengthy period of self-quarantine.
A high growth company
Shares of Lightspeed POS (TSX: LSPD) are trading at $14.25, which is 70% below record highs. LSPD will roar back to recovery once the lockdown restrictions are relaxed globally.
The company provides point-of-sale services to several small and medium enterprises in North America and Europe, two of the worst affected regions in the world.
The Canada-based company is a leading provider of software, solutions and support systems to several restaurants and retailers. It aims to empower these businesses by helping them increase customer engagement, improve operations and generate growth.
While the COVID-19 will have a huge compact on company revenue in the next two quarters, long-term growth investors should consider investing in LSPD.
In its most recent quarter, it increased sales by a stellar 61% year-over-year. The stock is currently trading below its IPO price and will be one of the top-performing companies when the market rebounds.
