Growth stocks on the TSX have been pummeled in 2022. Arguably, many well-known growth stocks were extremely overvalued. As interest rates rose and recession worries increased, many of these stocks “popped” and lost a lot of their market value.
Bear markets are the best time to add high-quality growth stocks
Certainly, in the short term, this is worrisome. It’s never fun to see any stock you hold rapidly decline. However, this can also be a wonderful opportunity to add to stock positions or buy new stock positions. During bear markets, you can significantly upgrade your portfolio by buying great businesses that are unfairly marked down by the market.
If a TSX stock is down significantly, but its business continues to perform well operationally and financially, that is one indication of a good buying opportunity. If you are looking for marked-down, high-quality growth businesses, here are two to consider today.
BRP: A top stock with a bright future
BRP (TSX: DOO)(NASDAQ:DOOO) is fast becoming a global leader in recreational vehicle products. It manufactures leading brands like Sea-Doo (watercraft), Ski-Doo (snowmobile), and Can-Am (side-by-sides). I once heard a person describe BRP as the Apple of recreational vehicles because of its extreme innovation and unique cult following by users.
BRP stock is down 21% over the past year. Given supply chain issues and recession worries, the market has projected a serious decline in sales. So far, however, that hasn’t materialized.
In fact, quite the opposite. BRP just announced a solid second-quarter profits of $237.7 million. Revenues increased 28% over last year. BRP also raised its 2023 revenue and earnings-per-share outlook to expect 30% and 14% growth respectively.
Right now, investors can buy this growing TSX stock for only eight times earnings. It has not been this cheap since the 2020 market crash. Any chance to buy a high-quality TSX stock that is growing two times faster than its valuation multiple is a great long-term opportunity.
Brookfield Asset Management: A long-term compounding TSX growth stock
Brookfield Asset Management (TSX:BAM.A)(NYSE: BAM) is leading global manager of alternative assets. Since 2018, it has grown from $282 billion of assets under management (AUM) to more than $750 billion today. That is an impressive 26% compounded annual growth rate (CAGR).
Its rising portfolio of assets has translated into a 19% CAGR of distributable earnings in that time. Brookfield just hosted an investor day, where it projects AUM to rise to $2 trillion by 2027. If successful, that could represent a still attractive 21% CAGR going forward.
Brookfield stock is down 15% this year. It trades at a near 40% discount to its intrinsic value. To bridge this gap, it plans to spin off its asset manager as a separate entity.
This should streamline some of the accounting nuances in the overall Brookfield entity. It could unlock significant value if successful. Now may be just the perfect time to swipe up this quality compounding growth stock.
The Foolish bottom line
Bear markets are the best times to buy high-quality TSX growth stocks at cheap valuations. You will have to look past the stock market doom and gloom, and you will likely need to be patient. However, the returns out of these types of bear market investments can be life changing in the years and decades from now.
