Earlier this month, I’d discussed whether investors should be fearful in an uncertain environment. Bad economic data and high valuations have sparked fears of a market crash. I’d suggested that Fools should watch out for stocks with high valuations, especially tech stars like Shopify. The stock has shed nearly $300 from the all-time high it hit in late May. There is also the option to retreat to defensive stocks, a strategy that I’d covered earlier this week.
Today, I want to explore a more balanced strategy.
Market crash: Don’t miss your shot this summer
The stock market crash in the late winter and early spring throttled portfolios around the world. However, it also presented a mouth-watering buying opportunity. Bad economic data continues to poor in, and now investors are worried about a potential second wave of COVID-19. Instead of succumbing to the hysteria, this is a good time to steel yourself and hunt for bargains.
Manulife Financial (TSX:MFC)(NYSE:MFC) is a top Canadian insurer and financial services company. Shares of Manulife have dropped 26% in 2020 as of close on June 11. However, the stock has climbed 10% over the past month. Manulife is a high-quality company that is well worth snagging at a discount for the long term.
Like many financials, Manulife took a hit due to the COVID-19 pandemic in the first quarter. Net income fell to $1.3 billion — down $900 million from the prior year in Q1 2020. Manulife has continued to achieve robust growth on the back of its operations in Hong Kong and other Asian markets. Moreover, its LICAT capital ratio improved to 155%. The company is well positioned to weather global economic turbulence.
Shares of Manulife last possessed a very favourable price-to-earnings ratio of eight and a price-to-book value of 0.7. Better yet, it still offers a quarterly dividend of $0.28 per share. This represents a strong 5.9% yield.
Airliners are still solid long-term picks
The March market crash throttled airline stocks. There have been few sectors that have taken a harder hit, as tourism has been virtually obliterated by the global pandemic. Shares of Air Canada (TSX:AC) have dropped 63% in 2020 at the time of this writing.
Air Canada has predicted that it will take roughly three years to recover from this crisis. Those with an investment horizon of 10 years or more can safely consider Air Canada as a buy-the-dip opportunity. Air Canada CEO Calin Rovinescu recently pushed back against the hypercautious COVID-19 measures introduced by the federal government. He urged “proportionality” as many regions have seen cases fall.
Airlines may be facing a long road to recovery, but I still like Air Canada as a buy right now. A second market crash could push the price to even more attractive levels for those with a long-time horizon.
Don’t sleep on bank stocks
Canada’s top banks recently released their second-quarter earnings. Provisions for credit losses erupted at the Big Six banks in response to the dire economic situation. Scotiabank reported that roughly 300,000 clients opted for deferred payments on their loans. Shares of Scotia have dropped 19% in 2020 so far.
Regardless, I’m still bullish on Scotia going forward. The bank boasts a flawless balance sheet and attractive exposure to international markets. Moreover, it maintained its quarterly dividend of $0.90 per share. This represents an attractive 6.2% yield. Scotiabank stock last had a favourable P/E ratio of 9.4 and a P/B value of one.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. The Motley Fool recommends BANK OF NOVA SCOTIA.