TFSA: Beat the Market in 2023 by Locking In Bargains Now

PetValu Holdings (TSX:PET) and another affordable TSX stock may make for interesting value options for your TFSA.

| More on:
Paper airplanes flying on blue sky with form of growing graph

Image source: Getty Images

Don’t expect the market turbulence to stop as we enter a new year. I’m sure you’ve heard the numerous pundits who expect more volatility in the first quarter of 2023. In any case, investors should continue to stay the course and stay invested, while topping up on cheap holdings when possible. Though the new year and quarter may not bring the end of the bear market, TFSA (Tax-Free Savings Account) investors will get a chance to top-up, with $6,500 in funds that can be added once January hits.

The $6,500 TFSA contribution limit is up $500 from $6,000, thanks in part to inflation. It’s a modest boost, but one that many Canadians won’t be able to take advantage of, given rising debt levels and the continued pressure on savings accounts. For investors who can contribute the full amount, I think there are ample places to go bargain hunting, even if we are on the cusp of a recession.

Buying ahead of a recession seems reckless. However, it was arguably more reckless to be a net buyer of securities (stocks or bonds) just a year ago. Relatively speaking, the first quarter of 2023 could be a decent time to be a value investor.

Nobody knows how bad the recession will get in the new year. Many market strategists expect it will be a mild downturn, with a few that think a recession can be avoided, even with the pressure of recent rate hikes.

In this piece, we’ll consider two intriguing Canadian stocks that could make for cheap additions to your TFSA. Consider pet-food retailer PetValu Holdings (TSX:PET) and Big Six Canadian bank Bank of Montreal (TSX:BMO).

PetValu Holdings

When it comes to your TFSA, don’t look to time a market bottom or end of this bear market. Don’t focus too much on the macro. Odds are, the macro data is already fully factored into markets. Instead of trying to time the Fed, inflation, or any other uncontrollable and unpredictable piece of data, stick with uncovering stocks that can ride out another year of choppy moves.

Outside of the red-hot energy plays, PetValu stock has been of the TSX Index’s most impressive performers for the year. The stock is now up more than 20% year to date. And I don’t think there are any reasons the consumer discretionary play will slow down.

As it turns out, pet supplies behave like more of a staple than a discretionary when market tides get a tad choppy. That’s worked out well for PetValu and its inflation-hit pet owners. The nature of pet food and supplies has worked in PetValu’s favour. Further, exceptional managers have helped make PetValu a domestic player with the ability to compete effectively.

In the digital age, PetValu’s performance is admirable. With an expansion plan and a modest 3.1 times price to sales (P/S), I still view PetValu as a defensive growth stock deserving of a much richer multiple.

Bank of Montreal

Bank of Montreal stock is a Big Six banking underdog that recently slid 9% off its early December highs. Indeed, the winds of recession are getting colder. BMO stock found itself on the receiving end of an analyst downgrade, with Bank of America reducing the name to neutral from overweight.

Macro headwinds facing the banking industry were mostly to blame. While BMO isn’t immune to such forces, I still think the calibre of management is being discounted.

After the latest slide, BMO stock trades at a 6.12 times trailing price-to-earnings multiple. That’s quite absurd for one of the highest-quality banks in Canada. The 4.65% dividend yield is also ripe to pick for TFSA income investors.

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.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Fool contributor Joey Frenette has positions in Bank Of Montreal. The Motley Fool recommends Bank of America and Pet Valu. The Motley Fool has a disclosure policy.

More on Investing

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

Why Open Text Stock Rose 11% Last Month

Not all tech stocks are performing poorly. In fact, Open Text stock (TSX:OTEX) continues to rise higher, though it's still…

Read more »

Business success with growing, rising charts and businessman in background

Could This Canadian Stock Be in for a Gigantic Meme Rally?

Could Cineplex become the next Canadian meme stock to see incredible gains, or will this company wither in obscurity?

Read more »

Target. Stand out from the crowd
Stocks for Beginners

3 Must-Buy TSX Stocks for Anyone New to Investing

Are you new to investing? These three TSX stocks for income, value, and growth are must-buys for any Canadian investor…

Read more »

grow dividends
Stocks for Beginners

After the Spinoff, Brookfield Stock Rose 16% in January

Brookfield stock is a wonderful business with a track record of delivering annualized returns of over 16%. And it's cheap…

Read more »

Businessman holding AI cloud
Tech Stocks

2 AI Stocks to Watch in February 2023

Those looking to invest in AI stocks can consider companies such as Nvidia and CrowdStrike Holdings right now.

Read more »

edit Woman calculating figures next to a laptop

Got $1,000? Buy This Growth Stock Before it Takes Off

Docebo (TSX:DCBO) is a great stock for long-term investors to buy and hold at these depths.

Read more »

A worker uses a double monitor computer screen in an office.
Tech Stocks

Better Buy: Shopify Stock vs. Lightspeed Stock

Shopify (TSX:SHOP) stock and Lightspeed (TSX:LSPD) stock both had their time in the sun, but which will feel the heat…

Read more »

tsx today
Energy Stocks

TSX Today: What to Watch for in Stocks on Thursday, February 2

More corporate earnings reports could give further direction to TSX stocks today.

Read more »