Canadian stocks are doing a great job of holding their own relative to the S&P 500 over the past few weeks. Indeed, the hot start to January has led to a fairly weak second half of February. Indeed, negative commentary and headlines are back following a higher-than-expected U.S. inflation report for the month of January. There’s a fear that inflation could linger for longer, pushing back the “rate-cut” hopes by 2024, or perhaps later.
Indeed, worrying about month-to-month economic data is not good for your health or your wealth. In any given month, the numbers beat, miss, or hit a target. Constant beats and hits are just not realistic. Along the way, blips can be expected, and investors shouldn’t make too much of it, even if they spark a wave of negative short-term forecasts.
Oversold conditions: Undervalued gems are more abundant
After a few weeks of fading market sentiment, I think there are bargains to be had for the venturesome, and Foolish investors who are willing to defy the negative short-term market forecasts by buying the dip and hanging on for the long haul (think five years at minimum).
In this piece, we’ll have a look at two oversold Canadian stocks that seem to have been overpunished and are now trading at what I view as a great value.
Consider Jamieson Wellness (TSX: JWEL) and Cargojet (TSX: CJT), two TSX stocks that are down 11.1% and 7.7%, respectively, over the last week (past five trading sessions) alone. Indeed, both firms have their own company-specific headwinds, but the recent haze of gloom, I believe, has made the selling pressure that much worse.
Jamieson Wellness
Jamieson’s a vitamin maker with a 100-year-old brand that many Canadians are likely familiar with. It’s a high-quality brand that has the edge over various generic rivals in a fairly commoditized space. The rise of private-label goods, in particular, has been a major concern for the big-brand consumer-packaged goods players. Supplements and wellness products aren’t something consumers should skimp on. If one’s health is on the line, it often costs more to go with a cheaper generic.
In any case, Jamieson seems like a firm that can mostly resist the headwind of inflation. But it’s not immune. The stock slid last week, thanks in part to a tough fourth quarter. Earnings-per-share numbers came up a penny shy of the estimate. The results themselves weren’t terrible. Regardless, the multiple was quite high for the name going into the results.
After last week’s selloff, shares trade at a more palatable 26.3 times trailing price to earnings (P/E), which I think discounts the firm’s growth profile. Looking ahead, China is a market where Jamieson could really take its top line to the next level.
After the big dip, Jamieson stock looks like a very tempting defensive growth stock to buy in a recession year.
Cargojet
Cargojet is in an ugly bear market, with shares falling more than 3% on Monday’s session. The stock is off more than 50% from its all-time high hit in 2020. Though e-commerce isn’t booming like it once was, as consumers tighten their purse strings, I still view Cargojet as a terrific way to play the secular trend that may be closer to a recovery than many may think.
In any case, the stock’s trading for 7.3 times trailing P/E. With a $2.1 billion market cap and a sizeable moat (its aircraft fleet), I view Cargojet as a mid-cap stock that will fly high again. For now, shares seem to have grounded, but likely not for long.
