What’s better: hunting for new deals and hidden gems that might have explosive growth potential that none of your current holdings might be capable of offering or sticking to buying more of what you already have?
There is no easy answer. Both approaches work for different types of investors. However, if some good of the stocks that you already have in your portfolio are available at a discounted valuation or price, increasing your position might yield slightly better results than betting on a new, unknown entity.
An undervalued aristocrat
Thomson Reuters (TSX: TRI)(NYSE:TRI) has evolved a lot in the last few decades. What started out as a newspaper company is now a professional services company that is now making waves in the legal industry with its services and solutions/products. Many of its products have a decent user base in the legal and tax, and accounting industry.
It has also retained some of its newspaper roots and has reconfigured itself as an answer company, with information, answers, and ideas about various problems.
And this change reflects quite positively on the stock’s performance. It has been on its way up almost constantly since 2012, and this appreciation has resulted in a 10-year CAGR of over 20%. And since it’s modestly undervalued and discounted (12.35%), it’s a great time to add to your stake.
A tech giant
The tech stock has seen a massive decline in the last few months, but few stocks came down as hard as the leading tech company and e-commerce giant Shopify (TSX: SHOP)(NYSE:SHOP). The post-pandemic recovery momentum carried the stock high enough that it became the most expensive security on the TSX. And the fall has been just as hard; it fell from over $2,100 to $757 per share.
And the 64% discount is still showing signs of growing. If the stock stays on the current downward trajectory for a bit more, it might reach the pre-pandemic peak.
With a price-to-earnings multiple of 26.2, the stock is brutally undervalued if you compare it to its own valuation history and modestly undervalued as a tech stock. It’s a bargain now and will be more of a bargain if it dips more and is a very compelling growth buy.
A crypto stock
Crypto stocks like Galaxy Digital Holdings (TSX: GLXY) are experiencing a downward force from two different angles. The tech sector as a whole is still falling, and crypto giants like Bitcoin and Ethereum are also experiencing a slump. So, it’s only natural to find Galaxy Digital trading at a 58% discount from its 2021 peak, and it might be considered far from the depth the stock has yet to fall to.
The stock is currently a bargain for two main reasons. One is that it’s highly likely to at least double your money during the next Bitcoin bull run, assuming it pushes the stock to its 2021 peak. The second reason is that as a crypto stock, it might offer slightly magnified growth compared to the underlying crypto assets. If they rise 80% or 90%, the stock may reach as high as 150%.
Foolish takeaway
The three discounted and undervalued stocks are already great bargains, and they are likely to become even more attractive from both a valuation and a price point if the current state persists. Buying them at the peak of the dip would be a great way to balance out any expensive purchase you might have made of the same companies.
