Beginners: 2 Bargain-Basement Stocks I’d Buy Now

Spin Master (TSX:TOY) and Canadian Tire (TSX:CTC.A) are great deep-value stocks on the TSX that beginners should act on today.

| More on:
sale discount best price

Image source: Getty Images

Beginner investors have reason to be a bit rattled amid the recent market selloff. The pullback has dragged on for far longer than expected, with markets that have been stuck in a rut all year. Yes, 2022 has been a horrid year. But will it stay that way? Ultimately, this depends on the U.S. Federal Reserve. The fear is that they’ll hike interest rates until we’re sent into a recession.

If inflation gets too hot, the Fed could even keep hiking once a recession is in and employment begins to fade. Balancing employment and inflation is no easy task.

Sometimes, you just can’t have both at the same time. Although it would be nice to have a soft landing, with no recession and tempered inflation, nobody knows just what we’re in for. As you know, there’s nothing markets hate more than uncertainty, especially if you throw in the word recession. With the inverted yield curve and market moves that seem to price in some chance of a recession, investors may wish to start taking a contrarian view for a change.

There are great businesses out there that can still do well over the long run. First, acknowledge you probably won’t catch the bottom in a value stock you’re looking at. Then have a game plan for how you’ll react to a further drop. If shares fall, you should have cash on the sidelines to buy more shares! That’s the beauty of dollar-cost averaging (DCA). It takes market timing out of the equation and can help you achieve a better cost basis in a bear market (if we are in one).

Spin Master (TSX:TOY) and Canadian Tire (TSX:CTC.A) are two beloved stocks that I view as a bargain, even if the economy is headed for a downturn.

Spin Master

Spin Master is a toymaker that’s down around 14% from its 52-week high. Amid its choppy consolidation channel between $40-50, the stock has steadily become cheaper! Today, the $4.5 billion company trades at 14.5 times trailing earnings. That’s not bad when you consider the continued innovations (just look to digital games growth!), the roster of strong brands, and the incredibly sound balance sheet.

Amid rising rates, Spin’s balance sheet is a thing of beauty. With a strong track record of M&A, Spin Master could easily gobble up the next big toy firm as the going gets tough.

In any case, there’s not a lot baked into shares of Spin here. Though discretionary companies don’t do great in recessions, it’s worth noting that the stock is still below its pre-pandemic all-time high, just shy of $60 per share.

While nobody knows when the tailspin will end, I think the valuation is starting to get a bit ridiculous. My takeaway? I’d buy half a position today and half should shares tumble to $30 per share.

Canadian Tire

Canadian Tire is an iconic retailer that investors should not discount. Since recovering from the COVID crash, shares have steadily peaked at just over $200 per share, gradually stumbling to $171 and change per share — where the stock sits today.

With a bountiful 3.1% dividend yield and a mere 9.3 times trailing earnings multiple, Canadian Tire stock seems to be the epitome of deep value. While the Tire could be deflated further from retreating demand, I still think the long-term prospects have never been better. Triangle loyalty and a growing number of exclusive brands make the Canadian retailer one that has staying power.

The $11.1 billion retailer could prove choppy moving forward. I’d look to just nibble today, but add should the stock fumbled to $150 per share — a level that’d put the yield closer to 3.5%.

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 has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Spin Master Corp.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »