One pandemic-driven crash was enough to rock the stock market to its core. But the recovery has been disproportionately powerful and sharp (at least for some sectors), and subsequent pandemic waves couldn’t do much to waver the stock market’s growth momentum.
But we are quite far away from the 2020 market crash, and the growth that was initially fueled by recovery optimism is now powered by actual recovery. This also means that the market is now a bit more susceptible to the adverse effects of the pandemic, which is relevant now more than ever in the wake of an already brewing fourth wave.
The number of new cases is rising, and even though the slope is more akin to the second wave compared to the third (which was sharper), the fear this new wave is rekindling is relatively more profound because of the new, deadlier variant propelling the pandemic. The sharp rise in the number of cases is currently seen in the unvaccinated population, but the vaccinated Canadians might need to get booster shots as well.
If the fourth wave causes the market to dip, you might want to keep your eye on certain overvalued growth stocks and buy them during the dip.
A transportation stock
TFI International (TSX:TFII)(NYSE:TFII) has a vast network of operating companies and an impressive presence in Canada and the United States. The company is also expanding its influence to Mexico. The Montreal-based company was already one of the largest trucking companies in the country, and thanks to its acquisition and expansion, it’s now counted among the big players across the border as well.
TFII doesn’t just own and operates the largest trucking fleet; it has also grown to become Canada’s largest tank truck fleet owner as well. Its impressive size and strong international presence are partly the reasons for its meteoric rise, especially since the pandemic-driven crash.
The stock had grown about 436% since its lowest valuation in March 2020, and it’s not showing any signs of slowing down, although a dip in the market might present you with the ideal opportunity.
A financial stock
TFII’s growth before the pandemic was just moderately high, and if you are looking for a company that has a richer growth history, goeasy (TSX:GSY) is the stock to consider. It’s one of the most consistent and powerful growth stocks currently trading on the TSX and has a 10-year CAGR of 43%. A lot of it has to do with a sharp change in the angle of growth after the market crash, but the number was relatively high, even before the pandemic hit.
The company has grown over 200% in the last 12 months alone, and considering its modest price-to-earnings ratio of 14.8, it might keep rising for quite a while at the same pace. One deterrent that could cause the rise to slow down or even take a dip towards an even more attractive valuation (and yield, which is currently 1.3%) would be a market-wide correction triggered by the fourth wave.
One problem with growth stocks like TFII and goeasy is that if you wait too long to buy or the valuation comes down to more “affordable” levels, you might lose more in the form of a lost growth opportunity than you would gain by buying them in the market. So, keep the time cost in mind if you’re waiting for the fourth wave to cause a dip.