This piece will have a look at three TSX stocks that have been rolling over of late, while the TSX Index has continued its climb on renewed COVID-19 vaccine hopes. The following names have been resilient in the face of the pandemic, but with a 2021 end in sight, they’ve drastically fallen out of favour, as investors look to raise money to place their bets on the highest-upside recovery plays.
As we inch closer to the post-pandemic world, the following names could stand to get clobbered further. But are any of them worth buying on the dip? Let’s have a closer look at Jamieson Wellness (TSX:JWEL), Kinaxis (TSX:KXS), and Empire Company (TSX:EMP.A), which are currently down 20%, 22%, and 14% from their all-time highs, respectively, after posting impressive rallies to kick off the year.
I’ve been a pretty big bull on Jamieson Wellness ever since it quietly went public on the TSX Index just over three years ago. Shares have enjoyed a glorious run since then, surging around 150% over the timespan. The stock got a bit too far ahead of itself, and just a few months before shares dipped, I’d urged investors to take profits off the table and to wait for the froth to be cut right off the top in the event of a “rotation out of pandemic-resilient growth into COVID-hit value stocks.”
Indeed, this is what happened just a month and a half later, as Pfizer pulled the curtain on their remarkably effective COVID-19 vaccine, which is now days away from being rolled out across select localities.
While I’m still a fan of Jamieson the business, I’d still prefer to sit on the sidelines as the stock, which still looks expensive, continues rolling over. While the vitamin maker has a world of growth opportunities, I find the stock’s 36 times earnings multiple to be a tough pill to swallow.
Kinaxis is a wonderful company that’s seen a profound acceleration to its business amid the pandemic. The firm develops supply chain management software, which has been in high demand, as COVID-19 disruptions have decimated many firms’ supply chains. To get supply/demand imbalances in order, Kinaxis’s platform was seen as a must-have to mitigate climbing costs involved with maintaining the supply chain.
With the pandemic’s end in sight, Kinaxis stock has been selling off viciously. It’s as though investors expect the supply chain to magically repair itself once COVID-19 is conquered. With a potential discretionary spending boom on the horizon, I think it’s just as vital for firms to adopt a supply-chain solution like Kinaxis’s to avoid the potential for lost sales on the other side of this pandemic.
If anything, Kinaxis should be rallying and not plunging so viciously, given its long-term growth story is still very strong. I’d buy Kinaxis on this dip and would encourage long-term investors to do so as well.
The Empire really struck back since falling sharply into those ominous March depths. But since October, Empire has struck out, with shares nosediving as low as 14%. With no signs that the negative momentum will slow down, Empire finds itself in a tough spot, even as COVID-19 cases continue surging uncontrollably.
It’s also a long way down the stock’s next support level at around $30. With shares trading at 14.7 times earnings, Empire is a pretty cheap stock, but as the rotation out of defensives continues into the new year, I suspect Empire stock will continue to be on the receiving end. The company recently delivered an underwhelming Q2/F2021 quarter, which missed the mark thanks in part to COVID-19-related costs.
Empire isn’t the best grocer to own here, but it is one of the cheapest ones in Canada if you’re keen on gaining exposure into the space to play defence amid this second wave. Personally, I’m steering clear of the name, as shares continue tumbling.
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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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends KINAXIS INC.