The loonie has been dragging its feet relative to the American dollar in recent months. Indeed, a sluggish Canadian dollar is bad news for a wide range of Canadian firms that transact domestically while importing goods from other countries. Further, getting dinged while traveling south of the border is never ideal, nor is having to put up with weak foreign exchange (FX) rates to purchase U.S. securities.
The good news is that there’s no shortage of value on this side of the border. Even with the U.S. banking turmoil down south, investors must factor in the exchange rate to minimize the pains that come with investing in markets. If the Fed decides to deliver no rate cuts in its next meeting, the Canadian dollar could rally, and your currency swap could prove ill-timed.
In any case, timing currency markets is a terrible idea. There are too many variables that go into FX moves. Instead, investors should focus on the long game and make FX moves when it makes the most sense. With the loonie just shy of US$0.73, I’d argue that it may be wiser to stick with TSX stocks — at least until the Canadian dollar can catch some sort of break.
It’s not just Canadians that can get a better bang for their buck with Canadians stocks. American investors looking to take advantage of a favourable rate may wish to explore what the TSX Index has to offer.
In this piece, we’ll look at two great stocks that may be appealing enough for U.S.-based investors to consider. With such a strong U.S. dollar (versus the loonie) and modest multiples on the stocks to be outlined in this piece, one can view both names as a way to get “double value,” so to speak.
Spin Master (TSX:TOY) is a Canadian firm that’s an underdog in the North American toy scene. Undoubtedly, U.S. toymakers seem like great value bets right here. However, I think Spin has more to gain, as it looks to claw market share with its strong toy pipeline and roster of exclusive brands.
The firm is best known for its strong brands like Paw Patrol, Hatchimals, Gund, and Etch-a-Sketch. The firm has been active on the merger and acquisitions front over the years, making good use of its strong balance sheet.
Right now, Spin Master is in a tough spot. With a recession weighing on consumer discretionary companies, investors have been bearish on the name — perhaps a tad too bearish. As you may know, mid-cap stocks (Spin has a $3.75 billion market cap) tend to face bigger downswings when times toughen.
At 10.5 times trailing price to earnings, I view Spin as a worthy name if you like strong brands and dirt-cheap multiples. Yes, softening spending will weigh heavily, but I think Spin is more than capable of giving its bigger brothers a run for its money.
Canadian Tire (TSX:CTC.A) is another value play that Americans may wish to consider picking up. Despite the name, Canadian Tire is more than just a retailer of auto parts. It’s more like a generic discretionary retailer. The firm sells home goods, appliances, sporting equipment, work gear, and even pet food.
Over the years, Canadian Tire has become less discretionary in nature. Pet food and other recession-resilient items could make Canadian Tire a stunning outperformer, as Canada braces for a recession. Further, Canadian Tire’s financial services businesses could feel pressure as the economy sags.
At 9.3 times trailing price to earnings, you’ll get a 4.2% yield. That’s a magnificent deal for Canadian and American investors.