The stock market ended February with a vicious growth-driven sell-off. The 10-year U.S. Treasury surged to around 1.6% before pulling back modestly, sparking a terrific recovery rally on the first day of March. More good news on the COVID-19 vaccine front also gave a massive lift to the reopening plays on the day.
It was a pretty epic rally across the hardest-hit areas. And while it seems like the stock market is back to being ridiculously expensive again, I’d urge investors to look to areas of the market that are still treading water, off considerably from their all-time highs.
IA Financial is an underdog in the Canadian insurance and wealth management space. The stock has typically commanded a lower yield than its peers in the financial scene. But, as I’ve stated in numerous prior pieces, what IA Financial lacks in yield, it more than makes up for in the quality of its business and earnings.
The firm is run more conservatively than most other insurers. The company isn’t willing to overextend with its dividend because insurance stocks can be prone to taking on double-damage once the economic downturns hit.
With shares still down over 12%, I’d look to pick up shares before they have a chance to bounce back. Shares trade at 11.6 times trailing earnings with a modest 2.9% yield.
Canadian Western Bank
I’ve been pounding the table on Canadian banks through most of 2020, urging investors to ignore the bearish sell-side analysts and to buy shares while they were down and out. The big banks have been through their fair share of crises before and they’ve risen out, rewarding dip-buying investors with big gains and swollen yields for going against the grain at the worst possible moment.
Today, the big banks have (mostly) recovered. And valuations are back to being in-line with historical averages. If you missed the run-up, Canadian Western Bank, I believe, is a terrific catch-up trade. The stock remains cheap at 11.5x trailing earnings, with room to run as the ailing province of Alberta looks to bounce back from one of the worst years on record.
Oil prices and other commodities are already roaring higher. And CWB stock, which has previously been punished for its Albertan exposure, may start to be rewarded should oil’s rally continue to run.
If you think we’re in for a post-pandemic spending boom that’ll fuel the “roaring 20s,” battered discretionary stocks are where you’ll want to be for the most gains. Spin Master, a Canadian toy maker, is a terrific high-upside bet after slogging through 2020.
The firm expects gross product sales for this year to be in the 32-34% range, as headwinds gradually turn into tailwinds. With a rock-solid balance sheet and enough dry powder to pull the trigger on opportunities within the toy space, Spin is a top pick for Canadian investors looking to maximize their gains on the other side of this pandemic.
The roster of toy assets and brands is terrific, as is the low price of admission. At 1.5 times sales, TOY stock is far too cheap to continue ignoring, especially ahead of a reopening and a potential spending boom.
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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 owns shares of and recommends Spin Master.