2 Wide-Moat Stocks That Could Soar Post-Recession

CP Rail (TSX:CP) and MTY Food Group (TSX:MTY) are two wide-moat stocks that may be hard to stop here.

| More on:
Arrowings ascending on a chalkboard

Image source: Getty Images.

Arguably, the risk/reward scenario has improved since last year, even though the perception of risk has increased. The last thing you want is a complacent market (like in 2021) that thinks nothing can drag it down. Indeed, we saw a glimpse of how far greed can go if left unchecked.

Now that the “fun” is out of the markets, and there’s nothing but pain, it may be time to give the beaten-down, blue-chip stocks another glimpse. They won’t be down forever. It could take quarters or even years to recover. But as a long-term investor, you have years to wait for your investments to bear fruit. What you don’t have is the appetite for chasing assets you cannot value. At the end of the day, valuation is the name of the game.

At this juncture, CP Rail (TSX:CP) and MTY Food Group (TSX:MTY) looks attractive from a long-term risk/reward standpoint.

CP Rail

CP Rail isn’t the most exciting stock in the world. It’s an old business that has not changed much over the decades. However, it’s this lack of change that makes it so enticing and predictable. In a prior piece covering CP’s rail peer, I’d highlighted the life-changing gains that railways provided over the span of decades. Indeed, you really don’t need to pursue exciting opportunities if you want to make big money over +20 years. Year to date, CP Rail has chugged 4.2% higher, while the TSX sunk into a correction.

Since 2002, CP stock has delivered for investors, with more than 1,500% in gains. Undoubtedly, those who just held through the financial crisis (which wiped out a considerable amount of market value) did just fine. It’s important not to panic when a recession looms. Instead, it’s far better to buy, as others become willing to sell to you at discounts to a firm’s intrinsic value.

At 33.8 times trailing price to earnings (P/E), CP stock looks expensive. But given its durable growth profile and its new Kansas City Southern acquisition (granting it Mexican exposure), the price may be worth paying, especially if shares sink lower into year’s end.

MTY Food Group

MTY is a casual-dining firm that took a left hook to the chin during the pandemic. Fast forward to today, and the stock is pretty much at levels it fluctuated in prior to 2020. At 15.2 times trailing P/E, MTY is an intriguing value play for those who wish to continue to play the strength at food courts. Indeed, recessions tend to drag on consumer spending. Less foot traffic at malls could bode negative for food court visits. Regardless, food courts are still one of the cheapest ways to dine out without breaking the bank.

Further, mall walks and necessity-based buying should not be ruled out. If anything, visits to the food court could remain stable, and MTY may have what it takes to add to its recent history of impressive bottom-line beats. The company has beaten on earnings per share for four straight quarters. Even as recession looms, investors should expect more strength, as the consumer continues to spend more time at malls and food courts.

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 MTY Food Group. The Motley Fool has a disclosure policy.

More on Investing

Walmart WMT stock market investment
Dividend Stocks

Better Buy in September: Passive-Income Plays or Growth Stocks?

This Exchange-Traded Fund could offer both monthly passive income and growth potential for investors unsure about the best stocks to…

Read more »

Dividend Stocks

3 Canadian Stocks You Can Confidently Buy Now and Hold for All Time

Today, we aren't messing around. These Canadian stocks are the best of the best for literally any portfolio.

Read more »

hand using ATM
Bank Stocks

Invest $7,000 in This Dividend Stock for $367 in Passive Income

Investors are encouraged to accumulate shares of solid dividend stocks like BMO stock on market pullbacks.

Read more »

A golden egg in a nest
Investing

3 Canadian Stocks You Can Confidently Buy Now and Hold Forever

These three Canadian stocks offer growth, income, and value, making them compelling investment options to buy and hold.

Read more »

Payday ringed on a calendar
Dividend Stocks

Pensioners: 3 Stocks That Cut You a Cheque Each Month

These three monthly paying dividend stocks with high yields could boost pensioners' passive income.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

Want 6% Yield? The 3 TSX Stocks to Buy Today

These Canadian dividend stocks offer high yields of at least 6%, making them compelling investments for passive income.

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

Investors: Should You Buy CNR or CP Stock Right Now?

These two railway companies have long been superior investments. But one seem to slightly edge out the other.

Read more »

Dice engraved with the words buy and sell
Bank Stocks

TD Bank Stock: Buy, Sell, or Hold Right Now?

Toronto-Dominion Bank (TSX:TD) stock is at a crossroads. Recent growth and steady dividends attract buyers to TD Bank stock, but…

Read more »