Investors should temper their returns expectations after a brutally bearish year for broader stock markets. Indeed, the tech boom of 2021 led to its inevitable bust. With interest rates rising in the U.S. to beat inflation down to more manageable levels, investors have been bracing for more rate-related pain.
With two regional bank failures in the U.S., one can’t help but feel just a bit on edge. Bank failures are scary. And a contagion could make things far worse. For now, the contagion risk is low, despite jitters sent down the spines of some of the European banks, which have spooked markets in recent trading sessions.
The key to investing amid bearish conditions?
Even if the bear is nearing its end of life, investors shouldn’t chase battered stock with the expectation of a fast recovery. Indeed, Charlie Munger (Warren Buffett’s right-hand man) says that the key to a happy life is to lower expectations.
With low expectations, you can surprise and delight yourself. Not only may low expectations be key to overall life satisfaction or general happiness, but low expectations amid bearish conditions can lead you toward sound investments that help you power solid returns without having to risk your shirt.
You see, high expectations for market returns can lead you towards the riskiest and most dangerous stocks in the market. If your expectations are more realistic, you can pick up shares of a company that can generate solid, more predictable results over time.
Deep value and predictability of cash flows in the face of uncertainty are what investors should strive for to make it through the last stretch of this bear market. That way, you’ll likely set the stage for good results (on a relative basis), regardless of where the broader stock market averages head next.
In this piece, we’ll look at one “flatlined” stock that I believe has really low expectations baked in. Such modest expectations could accompany impressive results down the road.
Quebecor
Quebecor (TSX:QBR.B) is a regional telecom that doesn’t get a lot of attention from the mainstream financial media. On any given day, there are “sexier” plays to give one’s attention to. However, longer-term, I view Quebecor as one of the best long-term value plays to build wealth over the next 15 years.
Indeed, the regional telecom has done quite well for investors over the past five years. The stock returned around 29%. And that’s not including the bountiful dividend, which currently yields 3.74%. In recent years, the dividend yield has crept higher as the stock stalled out.
Shares are where they were back in April 2019. Having not gone anywhere for four years, I view Quebecor as a compelling consolidated play that could be in a spot to pop like a coiled spring at some point down the road. Nobody knows when, but I think Quebecor has a lot to prove, as it looks to expand outside Quebec.
The Canadian telecom scene is ripe for disruption. And Quebecor is a fine candidate to rise to a challenge to get the big telecoms to lower prices. Recently, Quebecor was reported to work with the government in an effort to help drive wireless prices down. I feel the news was big but flew under the radar of most.
Quebecor stock is a value gem at 12.3 times trailing price to earnings.
