It’s a jittery time to be a beginner investor, with layoffs sweeping through the tech sector, a handful of U.S. bank failures, and ongoing interest rate hikes. The U.S. Federal Reserve is still committed to fighting inflation to get it back to that desired 2% target. Even if it means sacrificing a softer landing, tamer inflation may actually be better for the economy’s longer-term health. Further, a faster reduction in inflation may actually help spark a more powerful post-recession rally and bull market.
In any case, we need to move through a recession before we can enjoy the market’s next expansionary phase. With a recession likely weeks away, many investors would likely find it easier to sleep at night with new money put in bonds or GICs (Guaranteed Investment Certificates). With more generous rates, stocks are no longer the only game in town.
So long, TINA (“there is no alternative”)!
In this piece, we’ll check out two intriguing Canadian value plays that I think Mr. Market has all wrong. Though it could take some time for the following names to garner the respect they deserve, I’d not be afraid to be a big buyer at these prices for the next three to five years.
Consider shares of vitamin maker Jamieson Wellness (TSX: JWEL) and investment manager Onex (TSX: ONEX), two well-run companies with impressive long-term growth profiles and modest valuation multiples.
Jamieson Wellness
Jamieson Wellness is still riding on strong secular tailwinds that will, I believe, will stay strong, even as macro headwinds continue to surge. Health and wellness are trends that will not fade away anytime soon — not with the aging Baby Boomer population.
Though Jamieson is a very old Canadian brand in a commoditized marketplace, I think it’s found a way to separate itself from the pack. Remember, there are ways to thrive in commoditized markets. And Jamieson is one of the firms that’s found a way to maintain loyal customers in the face of generics in the vitamin aisle.
If a company can form a wide moat in the crowded market of sugary sodas, so too can a vitamin maker. Unlike the dominant soda firms, though, consumers have more on the line by opting for a cheaper alternative to Jamieson. When it comes to wellness, sometimes it doesn’t pay to go with the more affordable alternative, even in the face of high inflation and recession.
Jamieson’s products are already a great value for what you get. With every Jamieson product, you’re getting a promise of quality. Every green cap is a seal of approval for many Canadians.
As Jamieson takes its growth to the next level via new products and international growth, look for the stock to grow its earnings at a steady pace over time. At $32 and 25.55 times trailing price to earnings (P/E), I think many are sleeping on the defensive growth firm.
Yes, vitamins are boring. But boring is beautiful times of recession and inflation. I say stick with the 101-year-old, $1.34 billion Canadian icon.
Onex
Onex has been slumping since peaking in early 2022. Undoubtedly, the investment manager has sailed through some pretty hard times, but which firms haven’t had to deal with challenges these days?
Looking ahead, I’d look for Onex to put its solid balance sheet to work in deals, many of which are trading at multi-year discounts. At the end of the day, Onex is a long-term hold for those who believe management can put their talents to use and create alpha for investors through all sorts of market climates.
Onex is in a slump, but it won’t be forever. Down more than 40% from its high, I view the $5 billion underdog, as a deep-value pick for those with the patience.
