The second half of 2022 has been somewhat tamer than the first half. Still, with a recession likely in the cards for 2023 and a potential slowdown by year’s end, it’s tough to put any excess capital to work. The Bank of Canada (BoC) is expected to raise interest rates by 75 bps this week in a bid to stop inflation in its tracks. Undoubtedly, inflation at or above 7.7% is not good for everyone, and it’s arguably worse than a mild recession that rate hikes would induce.
Though a recession is not guaranteed, it certainly seems as though markets have already priced in a substantial drawdown. And with that, we could easily see markets begin to trend higher once it’s official that we have, in fact, fallen into a recession, which is two straight quarters of negative GDP growth.
TFSA investors: Think longer term!
For TFSA investors, that means buying stocks that look cheap while there’s a ton of negative news in the headlines. Like it or not, once good news comes in or bad news stops flowing in, markets will likely have already bottomed out. So, those looking to build wealth for their TFSAs over the next five years should look to be optimistic while most others are pessimistic. It will not be easy, given all the bears out there who are predicting the worst to come.
Being a contrarian at a time like this can be dangerous if you’ve got anything less than a long-term horizon in mind. If you’re committing to hold stocks in your TFSA for at least the next five years (10 years or more is preferable), you may wish to consider the following Canadian value plays while they’re still down and out.
Consider high-yield telecom titan in Rogers Communications (TSX: RCI.B)(NYSE: RCI) following its rough weekend.
Rogers Communications
Rogers has been in a slump alongside the broader Canadian stock market of late, slipping by more than 24% off its all-time highs on a macro weakness and a number of other uncertainties. On the weekend, Rogers suffered one of its worst outages in years, thanks to a failed network update.
Indeed, customers were more than frustrated, especially corporate clients who lost considerable business as a result of downed debit card terminals. Though the outage has since been solved for most customers, with credits likely on the way, the bad taste left in the mouths of customers will not be forgotten anytime soon.
When it comes to the Canadian telecoms, it’s all about network quality. Canadians pay top dollar for telecom services, and the differentiating factor is reliability. Indeed, the weekend outage will set Rogers back and likely cause considerable pressure on RCI.B stock on Monday at the open.
My takeaway? Any outage-induced dip is a buying opportunity for long-term thinkers. Yes, Rogers messed up with a lack of sufficient fail-safes. However, I think Rogers will learn from the fiasco and make it right for customers. The stock trades at 19.6 times trailing earnings, with a 3.25% yield. One has to think that the discount will only widen on Monday, as investors throw in the towel over the outage.
