Buying the dip hasn’t been too profitable of an endeavour for self-guided investors over the past year and a quarter. Indeed, buying the dip is all too easy when in the midst of a raging bull market. The gravitational pull of markets is higher when the bull is in the driver’s seat. With the bear calling the shots, dip buying has become painful. Though buying shares of companies at lower prices is always a good idea (if you’re a long-term investor), one must be careful not to exhaust their liquidity reserves at one instance in time!
With inflation chipping away at the purchasing power of our wealth and layoffs moving through various parts of the economy, cash can be hard to come by. Indeed, the days of TINA (there is no alternative) seem to be over. Not only are there alternatives to stocks, but there are ways to score a pretty good yield without having to risk too much. Still, higher risks will always mean a greater shot at reward, especially if you know where to look and can formulate a sound, unique investment thesis.
Risk appetite sinks. Time to give cheap value stocks a second look!
For now, many investors may be started to the sidelines. With GICs (Guaranteed Investment Certificates) offering more than 4% for various durations, it seems quite foolish (lower-case f) to take a chance with stocks that only seem to be gravitating lower, as recession calls from big-name pundits get louder.
Bearish pundits seem like sages these days. But they can be wrong and in a big way. In time, the bull will take the place of the bear. And sometime after that, the bear will be the star of the show again. As investors, we must be comfortable with investing through various cycles. Though it seems like bulls are the best times to make money, it’s arguably bear markets when the best long-term deals arise.
Of course, you need to pay the price in the form of higher market volatility due to macro uncertainties. However, volatility does not equal risk. If you put in the homework, you can use high market volatility to your advantage, by buying the dip in names that didn’t deserve to fall but did anyway due to an on-edge Mr. Market.
Currently, energy stocks look like great dips to buy if you’re in it for the long haul. They have juicy dividends and can deliver a less correlated (to the TSX Index) return for your portfolio.
Suncor Energy stock: A top pick in the oil scene
Suncor Energy (TSX:SU) is one Canadian oil stock that’s been clobbered too hard of late amid the recent slip in oil prices. The $53 billion oil sands behemoth isn’t the biggest ship in the Albertan energy patch anymore. But it’s still a firm that you can’t ignore. Arguably, the big oil firm is one of the best deals in today’s rocky market for investors seeking the perfect mix of value and income.
Activist investor pressures are very real, and they’ll help Suncor clean up its act to improve its safety track record. As it does, I see plenty of value to be unlocked as the firm improves upon its reputation. Suncor recently found itself on the side of analyst upgrades. New chief executive officer Rich Kruger is a very smart leader and one that could help bring Suncor to the next level.
At 6.1 times price to earnings, Suncor stock screams of value. The 5.12% dividend yield is also very enticing. It’ll take time for Kruger’s moves to pay off, but in the meantime, investors can be happy collecting the generous (and growing) payout.