2 Value Investments I’d Buy Over Tumbling Growth Stocks Today

TD Bank (TSX:TD)(NYSE:TD) and another growth/value stock could be ready to bounce, even amid a turbulent broader stock market.

| More on:
edit Person using calculator next to charts and graphs

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Growth stocks have been punished rather severely thus far in 2022. Rates are headed higher, and that’s awful news for some of the “growth-at-any-price” stocks that skyrocketed into the stratosphere over the past two years. The biggest winners of the early 20s? They’re among the biggest losers of 2022 thus far. There’s no question that Fed rate hikes are going to make it hard for some of the most battered, unprofitable growth stocks to recover. Many could take years, if not decades, to see their highs again.

Still, the stock market is likely baking in some amount of rate hikes in 2022 and 2023. Could it be that growth is bracing itself for the worst as the trade rolls over? It’s definitely possible. Otherwise, you wouldn’t have well-established firms and investors (think Bill Ackman who’s bought the dip this year) looking through the pain for bargains. Not all growth stocks will be bargains. Some deserve to take a hit on the chin. Others may not have fallen by enough, given how much the fundamentals have decayed of late. Indeed, bubbles have burst across the tech scene. Some remain, and the growth-to-value rotation could continue to be the big theme for the remainder of the year.

Growth sinks: Profitable growth and value ready to shine!

Fortunately, you don’t need to jump into the deep end quite yet. There’s no rush to catch a falling knife. You’ll stand to miss out on the quickest gains once the growth plays finally do settle down and form a bottom. But arguably, chasing such near-term profits isn’t a great idea, especially if you’re in it for the long-term game.

If you’re a beginner who’s easily rattled by volatility, don’t feel the need to act just yet on the fallen growth stocks, as many may not be ready to buy. Some may be overvalued, after all, especially if rates rise over five times this year (improbable, but not impossible!). Undoubtedly, there’s no need to impress anyone by diving into the deep end if you’re not yet ready to swim, or tread water! Instead, feel free to go into the shallow end of the pool with value plays that are less likely to crumble 10% or 20% just days after you’ve hit the buy button.

Currently, you can’t go wrong with the Canadian banks like TD Bank (TSX:TD)(NYSE:TD). For those feeling more venturesome, Jamieson Wellness (TSX:JWEL) is an intriguing profitable-growth option.

TD Bank

TD Bank is a solid Canadian bank that could be months away from announcing a major deal south of the border. The reaction may be positive, given TD’s reluctance to overpay. It’s all about creating value, after all. If no deals happen, expect big dividend hikes to line the pockets of shareholders. Either way, I’d say it’s a win-win, as the big bank looks to bolster its retail banking business and enjoy the tailwind of higher interest rates. Indeed, the bank held steady through tough times, but now that good times are looming, it’s tough to pass up on the name with its modest multiple.

The 3.3% yield is enticing. But it’s longer-term growth in the payout that could be even more attractive to extremely long-term investors.

Jamieson Wellness

Jamieson stock is not well right now after falling nearly 17% from peak to trough. The 100-year-old firm is ready to move on and grow at the international stage with a powerful brand and intriguing new products. Sure, vitamins aren’t exciting, but let’s not underestimate the power of the brand. It’s a quality brand built over a century, and I think it could lead to some exciting growth, as the firm moves on from COVID woes.

For now, the stock is rather pricey, still at 30.3 times earnings. Given its growth, though, I’d argue that the multiple doesn’t tell the whole story. In any case, I’m watching the name as it tumbles. The long-term narrative is still intact, at least in my books. For now, there’s a 1.73% dividend yield to collect while you wait.

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 owns TORONTO-DOMINION BANK. The Motley Fool has no position in any of the stocks mentioned.

More on Investing

Light bulb with jester hat perched on top
Investing

Got $250? Here Are 3 Smart Stocks to Buy Now

New investors looking for a strong start in stock market investing can consider these three TSX stocks.

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Investing

3 Smart Real Estate Stocks to Buy in August

If you're looking for high dividend income, consider Northwest Healthcare Properties.

Read more »

A worker gives a business presentation.
Investing

Where to Invest $5,000 for the Next 5 Years

Are you wondering where you should invest $5,000 for the next five years? Here are three top picks!

Read more »

thinking
Bank Stocks

RRSP Investors: Should You Buy TD (TSX:TD) Stock Now?

TD (TSX:TD) stock looks cheap after the big pullback in recent months. Is this the best time to buy TD…

Read more »

Dollar symbol and Canadian flag on keyboard
Stocks for Beginners

New to Investing? 3 Top Stocks Every Canadian Should Own

Safe dividend stocks paying out yields of at least 3% is a low-risk way to invest in stocks. Buying at…

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

Passive Income: 2 Dividend-Paying Energy Stocks I’d Buy Now and Hold Forever

These two energy stocks can provide an investment portfolio with both passive income and market-beating returns.

Read more »

A gamer uses goggles to play an augmented reality game. tech
Tech Stocks

The Best U.S. Tech Stocks to Buy in August

Tech stocks in the U.S. such as Microsoft and Broadcom have the potential to generate massive wealth for long-term investors.

Read more »

A plant grows from coins.
Dividend Stocks

1 Top Dividend Stock to Buy in August 2022 and Hold Forever

Leon's Furniture (TSX:LNF) stock is one of many quality dividend plays that could face most upside if a recession never…

Read more »