The TSX Index may be at or around all-time highs, but that doesn’t mean there’s zero TSX bargains to be had: quite the contrary! There are many compelling opportunities that have popped up over the last several months. The growth-to-value rotation has left many growth stocks in the doghouse. As the wildly popular growth trade takes a backseat to value (thanks to inflation), value could continue flexing its muscles into year’s end.
On the flip side, many battered growth stocks may also be overdue for a bounce if it turns out this inflation-driven sell-off is overblown.
Personally, I think the damage done to certain growth stocks is exaggerated. That said, investors must pick their spots carefully, as there remain many bubbles that have yet to fully deflate. Even if the broader basket of growth stocks bottoms out at these levels, the bubbliest parts of this market, I believe, will still stand to crumble under their own weight, even as the broader tech sector recovers.
Be ready for inflation volatility and negative surprises in the second half of 2021
In this piece, we’ll have a look at one value name that will help you weather any Fed surprises or inflation surges, and one growth stocks that could correct to the upside if things aren’t as ugly as they seem at this juncture.
Without further ado, consider Sleep Country Canada (TSX:ZZZ) and Lightspeed POS (TSX:LSPD)(NYSE:LSPD). A value and growth stock that will both stand to benefit as COVID-19 abates and the economy reopens its doors.
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Sleep Country Canada: Why buy a TSX bargain anywhere else?
Sleep Country Canada stock has been roaring back for nearly a year now, surging over 270% from its 2020 trough to its 2021 peak on the back of greater demand for big-ticket discretionary goods like mattresses, bed frames, and all the sort. It was scary to be a shareholder of Sleep Country last year. The stock collapsed 55% after trading water for three years prior. But if you had the courage to go against the grain, you were profoundly rewarded as we entered the next phase of the market cycle: recovery and expansion.
Despite Sleep Country’s epic recovery above and beyond 2019 levels, there’s ample value to be had from the mattress king, as it brings the fight to its e-commerce disruptors (think Casper and Purple Innovation), with its own line of mattress-in-a-box offerings that have done extraordinarily well during lockdowns.
The stock trades at 17.1 times earnings, alongside a juicy 2.6% yield. If value is inflation protection are what you seek, don’t sleep on Sleep Country stock.
Lightspeed POS: Recovering from the COVID-19 crash at the speed of light
I pounded the table on Lightspeed POS back when stocks were nosediving in March. Lightspeed was a commerce enabler whose clients were most at risk from lockdowns. That said, I stated that concerns were overblown and that Lightspeed was more than likely to rise alongside its small retail and restaurant clients.
Undoubtedly, Lightspeed’s platform was a tech edge for firms that fought for their survival. With an e-commerce platform, the name was also a great on ramp for reluctant retailers who were forced to open up shop online or run the risk of insolvency.
Not many TSX bargains can hit a new all-time high in the same year it crumbled over 70%. Fresh off some incredible quarterly results, Lightspeed is just getting started. The name has been punished by the broader souring of growth stocks. As we exit this pandemic, Lightspeed has much to gain as its clients survive the crisis to a potentially prosperous environment.
Lightspeed is firing on all cylinders. With catalysts to look forward to, I find it to be one of the babies that have been thrown out with the bathwater amid the growth sell-off.
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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 Lightspeed POS Inc.