I began investing during the 2008 bear market. I wasn’t thinking about timing the market or buying because the market was on sale. I just had available capital, and I put some of it into a few solid TSX stocks.
Now, 12 years later, those stocks are still stalwarts in my portfolio. In fact, they are some of my best overall performers. Even though the TSX recently fell by 40%, these stocks remain a green comfort when much of my portfolio was in the red.
Buy the bear market
These stocks are not “in the green” because they were the best companies on the TSX. They are green because I bought them at a depressed time in the market. The point that I am making is that buying in, through, and during a depressed bear market is, more often than not, a winning investment strategy over the long term
2008, 2011, and early 2016 were all opportunities to buy the bear markets. If I had only bought the S&P/TSX Composite Index around the bottom of those “end-of-times” markets (well, at least they felt like it), my portfolio would still be up today, respectively, by 50%, 15%, or 5%.
Today’s bear market is a wonderful opportunity for millennials and young investors to begin investing. You have the greatest advantage an investor could desire: time. You have 10, 20, 30, or more years to invest and steadily grow your capital. You don’t need to perfectly time the bottom; just begin nibbling away at quality stocks on sale.
Don’t be afraid; think long term
If I could speak to myself in 2009, I would say: “Don’t be afraid; the world will get through this. The world will thrive again. Buy growth. Buy growing dividends. Buy a little bit of risk. At these prices, you can trade a little risk for extra growth over the long run.”
So, if you are willing to nibble here, below are two stock that are facing short-term COVID-19 headwinds, but have long-term potential to outperform the market.
We will fly again
CAE (TSX: CAE)(NYSE:CAE) manufactures and services aviation simulation and training equipment across the world. Alongside the airline industry, CAE has taken a serious hit from the COVID-19 crisis. Yesterday, CAE announced it would have to lay off about 25% of its workforce and would suspend its dividend. The stock is off by about 60% since February.
Yet CAE is one of Canada’s foremost technology companies. Its simulation and training services are located across the world and are essential to the safe function of the global aviation industry.
Undoubtably, demand for training will be subdued right now. Yet pilots still need recurring training to ensure continued industry certification. The company will still continue to operate and produce revenue. CAE’s pain is reflected in the depressed stock price. If you ever see yourself flying again, I would suggest this is a good stock to buy.
We will buy again
Lightspeed POS (TSX: LSPD) is a developer, manager, and consolidator of cloud-based point-of-sales systems across the world. Its business caters to restaurants, golf courses, and small- to medium-sized retailers. Previous to the crash, it enjoyed an average 35% revenue-growth rate for the past three years.
Obviously, any type of payments business, even the greats, like Visa, are taking a hit here. People simply are not out spending money. Lightspeed stock, as a result, has lost almost 60% of its value over the past month.
Fortunately, Lightspeed completed an equity offering just prior to the stock market crash. This should leave it between $150 million and $170 million of cash on its balance sheet. Many of Lightspeed’s customers will be challenged during this time. Its transaction volumes will be down for the first half of the year. Yet Lightspeed should weather the temporary disruption.
As the bear market subsides and spending habits return, Lightspeed should see a significant re-pricing in its stock. This company has a long runway of growth ahead, since many businesses are moving their payments to streamlined, cloud-based platform. While it is unloved today, Lightspeed is well positioned to continue its growth trajectory in the future.
