The TSX Index powered higher in the first half of the year. While numerous pundits have warned that the broader markets are “overdue” for a correction (markets haven’t corrected in a while now!), it’s worth remembering that waiting for the next pullback is timing the market. And timing the markets is typically a very bad idea, especially for beginner investors who should seek to stay invested for as long as possible.
Moreover, we’ve witnessed some so-called rolling corrections going on behind the scenes in the first half of 2021. Those who owned the TSX Index outright may not have noticed, but various sectors have fallen into correction — most notably, tech stocks over fears of inflation and quicker-than-expected rate hikes.
It’s these rolling corrections that may give stock pickers terrific opportunities to scoop up quality merchandise at a great discount, even as the broader market continues marching higher.
Rougher waters in the cards for the second half of 2021?
Although the 10-year note has calmed down, pulling back just below 1.3%, with money that’s rotated back into high-growth tech, I wouldn’t rule out the occurrence of another tech correction in the second half of the year, especially if the U.S. Federal Reserve has enough evidence such that they go back on their “transitory” inflation views. Perhaps rate hikes could be in the card in as few as 18 months.
Nobody knows. Regardless, investors should stay the course and be ready for anything to strike, whether it be a correction or a rolling correction. If the latter strikes, I think it’s wise to continue to maintain a well-balanced portfolio that’s diversified across the board.
In this piece, we’ll have two TSX stocks that I’d look to buy together for the second half of 2021.
One name, MTY Food Group (TSX: MTY), is a reopening play with a value multiple that should benefit should the 10-year ascend again and COVID-19 cases abate. Another name, Docebo (TSX: DCBO)(NASDAQ: DCBO), is a high-growth pandemic-resilient play that should fare better if the pandemic worsens and the 10-year note holds steady or continues its decline.
Undoubtedly, both plays seem risky on their own, given macro uncertainties. But when bought together, I think one can achieve solid results without seeing their portfolios roll over if we’re due for more rolling corrections.
MTY Food Group
MTY is a Canadian casual dining play with a slate of wonderful fast-food brands under its umbrella. Many brands are food court staples and are direct plays on the reopening of Canadian shopping malls. Undoubtedly, MTY is a more aggressive reopening play. But given Canada recently surpassed the U.S. in terms of the percentage of the population that’s been fully vaccinated, I think the domestic reopening play looks a heck of a lot better these days, at least from a risk/reward standpoint.
Canada could be one of the first nations to reach herd immunity. While variants of concern, most notably “Delta,” could bring forth future waves, full lockdowns are suddenly looking far less likely. And that bodes really well for a company like MTY.
In a prior piece, I’d highlighted the possibility that MTY could achieve its best quarter ever, as a tonne of Canadians head back to the shopping mall to spend the savings built up over the pandemic.
Docebo
Docebo is a remote-work play that received a massive boost through the worst of 2020 lockdowns. As the economy reopens, Docebo stock could lose a step. But if you believe the future of work will be both online and in the office, the platform is likely to continue moving steadily higher in the years following the pandemic.
In any case, I’m a huge fan of the platform and the growing list of eyebrow-raising clients. Regardless of what ends up happening next, I think Docebo will continue winning over big business, as the “hybrid” work model takes off in the latter stages of this pandemic.
Do be warned: Docebo is a high-multiple growth stock that could plunge if rates pick up again.
