The TSX Composite Index was down by around 0.7% Tuesday, though it bounced 1.64% the following day. Meanwhile, other North American indices were suffering, too. The tech-laden NASDAQ was down by more than 4%, though this bounced midweek by 2.88%. Some observers have been quick to label the sell-off a market crash. The downturn in tech stocks in particular led the way in one of the worst sell-offs since March.
October and November are looking like key stressors, with a bunch of loan deferrals due to expire not long before the U.S. election. Throw in the potential for international conflict, a messy end to hurricane season, and/or another wave of coronavirus infections, and a real market crash isn’t off the table just yet.
Looking for long-term growth?
Investors may want to think defensively. Boston Pizza Royalties Income Fund (TSX:BPF.UN) matches defensiveness with growth potential. It’s also a rare name that is both a value play and a growth generator. As such, it satisfies an unloved growth thesis. Of course, this asset type is not for everyone. Investors seeking the steepest upside may be interested in certain names no matter the price tag.
Overvalued but lacking clear growth characteristics, fashionable tech stocks have proven dangerous of late. Of all the major North American indices, the NASDAQ has suffered the most this week.
In a couple of important ways, the stock splits of Apple and Tesla were dangerous moves. They encouraged a surge in activity that has not only spooked the markets but also appeared to crash online brokerages at the time. Compare this with the last big tech selloff, which followed a breakthrough in vaccine development from pharma outfit Moderna.
How to fight further tech stock sell-offs
But should investors getting out of some tech names still look to that sector for the same kind of growth? Perhaps not. That’s why names like Boston Pizza might prove suitable replacements. Not only do these kinds of names have strong outlooks, but they also support a recovery thesis.
One growth trend that may outlast the pandemic is automation. The streamlining of businesses and industries has always been the Holy Grail for the mechanics sector. However, the pandemic has shone a spotlight on the push for efficiency. This can be seen in the kinds of digitalization stocks that have been pushed higher by the pandemic. But there’s a more physical counterpart to this development as well.
While the selloff this week was quickly followed by a bounce, looking towards long-term growth options might be a suitable way to replace FAANG-type stocks. Consider a niche name such as Kraken Robotics (TSXV:PNG), a major player in underwater sensors and robotics systems. This is a very interesting stock that could see a lot of action in coming years.
What makes Kraken so interesting is the mix of geographical diversification with a wide-moat play in a specialized field. The applications for underwater robotics are vast and satisfy theses based on both resource exploration and automation trends.