It is no surprise that any market volatility period makes investors fear for their capital invested in equity securities. However, not all investors look at volatile markets with hopelessness. Uncertainty breeds opportunities for value investors, and there were plenty of those throughout 2020.
While the majority of equity securities have regained valuations closer to pre-pandemic levels, some high-quality stocks are still trading at less than reasonable prices.
I will discuss two high-quality companies that Canadian investors can consider adding to their portfolios as value stocks for the long run.
Electric Vehicles (EVs) are becoming increasingly popular these days. EV stocks rose sharply before a pullback, but there is undoubtedly growing popularity for EVs. Companies like Magna International Inc. (TSX:MG)(NYSE:MGA) are well positioned to provide investors with significant returns with the boom in this industry space.
Magna may not realize massive returns due to other major players in the sector and car companies committing to full fleets of EVs by the end of this decade. These factors are still excellent for the automobile parts manufacturer.
Magna will be producing parts for EVs. To make things better, its joint venture with LG Electronics will let Magna International also enter the market for manufacturing computers used in electric vehicles. Both companies seek to create fantastic products that vehicle manufacturers can add to EVs, making Magna an excellent value pick.
Canada Goose Holdings Inc. (TSX:GOOS)(NYSE:GOOS) used to be a major entity on the TSX at one point. The top Canadian clothing company had a tremendous Initial Public Offering (IPO) that was soon followed by a dramatic decline. A trade war and market crash kept Canada Goose from growing again.
Analysts are predicting that the next decade will be massive for the company because of a potential surge in its retail production. While its sales declined by 20% last year, analysts expect a rebound of 24% this year. It could mean 192% earnings per share for the company, which seems like a possibility due to its latest earnings report.
After several quarters of declining revenue, Canada Goose reported growth in its recent quarterly report. Seven of its 28 Canada Goose retail stores remain closed, and it has yet to announce future outlooks for the financial year 2021. However, growing e-commerce sales could still provide a boost to its revenues.
Magna International Inc. is trading for $113.65 per share, and Canada Goose Holdings Inc. is trading for $54.59 per share at writing. These two companies’ valuations are up 27.62% and 46.63% on a year-to-date basis, respectively.
With the recent surge in valuations for both companies, it could be an excellent time to consider investing in Magna and Canada Goose shares before the barriers to entry become too high.
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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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Canada Goose Holdings and Magna Int’l.