The bear market is the best time to buy good companies, but you can’t make a profit out of your discounted holdings until the bull market comes. This is why most investors delay the purchase of these discounted stocks until there are strong signs and indications of a bull market building up. They may lose some of the discounts, but it’s usually balanced by the time factor.
After a month-long bullish phase, the TSX is going down again, and if you are looking for the right discount stocks to buy before the next bull market comes, two should be at the top of your watchlist.
A fashion company
Fashion falls squarely under discretionary spending, which usually goes down when the economy is weak and interest rates are high. High-interest rates discourage people from using their credit cards on purchases that might not be necessary.
The current economy is not too weak, but the high-interest rates are still a factor, but so far, they haven’t been enough to trigger a full crash for a stock like Aritzia (TSX: ATZ).
The stock is adequately discounted now and is trading at a price 28% lower than its post-pandemic peak. The magnitude of the discount makes it seem more like a natural correction and less a consequence of a relatively weak market, especially if you consider its very healthy financials and slight overvaluation.
However, the stock still looks poised to thrive in a strong bull market. Even if we look at before the powerful growth phase the stock went through right after the 2020 crash, it had an amazing run in 2018 and 2019, growing roughly 100 percent in about two years. If the next bull market increases the chances of a repeat performance, you may consider buying it now in its discounted state.
A telecom giant
Rogers Communications (TSX: RCI.B) is one of the three telecom giants in Canada. Even though it already had a strong position, especially among the 5G stocks in the country, thanks to its impressive reach, it has grown even more substantially thanks to an acquisition. After acquiring the fourth-largest telecom company, Rogers now also dominates the Canadian cable market.
It’s still not on par with the other two telecom giants in Canada when it comes to market capitalization, but when it comes to wireless subscribers and now the cable network, Rogers is easily at the top of the sector. Its massive 5G network, which reaches about 96% of the country’s population, has also positioned it well for an IoT boom, assuming one is coming.
The stock is currently trading at a modest 11% discount. It is offering dividends at a 3% yield, making it a good long-term buy for modest dividends and a strong short-term buy for the next bull market (for capital appreciation).
Foolish takeaway
Both Artizia and Rogers have strong positions in their respective markets. Aritzia is one of the largest names when it comes to luxury fashion goods, primarily for female consumers, in Canada. Rogers, on the other hand, is a clear leader in multiple telecom domains. Both companies are also financially healthy, making them suitable long-term holdings.
