The market correction calls are flowing in again, and all it took was a brutal Tuesday of trade. Just when you think the markets had permission to move higher as investors began to shrug off the Evergrande contagion, a sudden uptick in the 10-year rates has brought forth a feeling of deja vu.
It seems to be back, with tech stocks leading the downward charge once again. In numerous prior pieces, I noted that the odds of a continuation of the growth-to-value rotation in the first half were likely to reappear at some point in the second half. And while tech stocks may stand to take on the brunt of the damage once again, given profits far into the future are worthless with higher rates, I do think investors should look to step in and do some buying.
The 10-year note yields 1.55%, and if it creeps back to the 1.8% mark, it may prove too early to jump into the deep-end with the hardest-hit growth stocks from Tuesday’s session. As such, investors may wish to take a raincheck on names like Docebo as they look to scoop up the value names that got pummelled anyway.
Many bargains after the market’s “partial” correction
A market correction is defined as a 10% drop. But given many names are already in correction territory or worse, I’d argue that this partial correction or “half correction” is worth buying in case broader markets don’t officially fall by 10%. Given the lack of suitable investment alternatives out there, this semi-correction may be the best we’ll get. Of course, many big banks are calling for more pain ahead over the coming weeks and months.
As markets reverse course, consider already-battered TSX stocks like Agnico Eagle Mines (TSX: AEM)(NYSE: AEM), down 43% from its all-time high.
Agnico Eagle
Agnico Eagle Mines has been dragged down alongside its Canadian mining peers for many months now. The pain and negative momentum have gone from bad to worse. Still, I think there’s a compelling contrarian case for picking up a few shares of AEM right here following the firm’s recent announcement that it’s going to scoop up Kirkland Lake in a stock deal worth $13.5 billion. Undoubtedly, industry conditions have been brutal and such mergers can help create a bit of value over the long run via various forms of synergies.
Kirkland Lake has some pretty incredible assets, and for Agnico, the deal could be highly value-creative for truly long-term investors. Why? Retreating gold prices have caused considerable pressure across the industry. The pressure that’s likely to be temporary as uncertainties mount and investors begin to question the U.S. Federal Reserve’s view of the recent bout of inflation being transitory.
In any case, shares of AEM look to be on sale and could help investors temper any market-wide volatility moving forward, given the stock’s low correlation (the beta is currently sitting at 0.63). Moreover, the 2.8% dividend yield makes AEM one of the more bountiful miners out there.
