Millennials may have been dealt a tough hand, with a number of recessions hitting them in the pocketbook over the past two decades. That said, millennials still have time on their side and can dodge and weave through the dips that are bound to hit the markets.
Broader stock markets experienced a bit of relief over the past week, but Fed chair Jerome Powell’s latest comments were anything but soothing. Investors can expect perhaps a few more rate hikes than expected. As the U.S. continues with its interest rate increases, Canada looks to have hit the pause button. Indeed, the effect has been detrimental to the loonie, which took another slide below US$0.73.
Millennials: Plenty of value here on the TSX!
Though there are prominent bargains in the U.S. markets, I’d argue that it’s wise for new Canadian investors to stay domestic — at least until value becomes more abundant in the U.S. exchanges to make the painful foreign exchange swap justifiable.
There’s no shortage of value plays on the TSX Index these days. In this piece, we’ll have a look at two names that I think should fare well, even with a recession likely just weeks away.
PetValu Holdings (TSX:PET) and StorageVault Canada (TSX:SVI) are two mid-cap TSX stocks that may be overlooked by the crowd. As you know, smaller market caps mean a greater shot of catching Mr. Market off guard, or, in other words, improving your shot of scoring a stock priced at a wider discount to its intrinsic value or true worth.
Of course, smaller-cap stocks can make for choppier rides. Millennial investors looking to the next five to 10 years for growth, though, should be more than willing to embrace the extra chop of this market for a shot at greater long-term gains.
PetValu Holdings is a relative TSX newcomer with a mere $2.74 billion market cap, but it’s one that many long-term-focused investors should have on their watchlists. If you own a pet, odds are you’ve wandered into a Pet Valu location. The domestic pet supply retailer has been around for decades and has done a terrific job of growing its profits, even with a growing number of competitors in the space.
The company offers a wide range of services that drive in-store traffic. Though PetValu’s digital presence is impressive, it’s brick-and-mortar where it really shines. Even amid tougher times, PetValu is guiding higher, noting that it expects continued sales growth for 2023, as it continues to grow its market share.
With 40-50 new locations to be opened on the year, I think PetValu makes for a defensive growth profile that few firms can match. The stock trades at 27.4 times price to earnings (P/E), which is modest given its growth prospects and recession resilience.
StorageVault is in the boring, but fairly steady business of self-storage units. Over the years, the $2.3 billion firm has conducted prudent mergers and acquisitions at a small scale. Such deals have been well timed and have helped StorageVault expand its presence across the nation. Looking ahead, I expect more of the same from the relatively young (founded in 2007) self-storage firm.
Over the past five years, shares are up just shy of 170%. Though it’ll be tough to keep up the pace, I think the firm can continue beating the market, as it’s found the formula to keep sales growth going strong.