Just because stocks experienced some relief in the first quarter does not mean you should let you guard down or deem that it’s finally time to chase. Dip buying has paid off and likely will continue to do so once the next bull market (we’re talking about the S&P 500) is born. Despite the nice run, the S&P 500 has yet to enter a bull market.
The latest retreat could prolong the bear’s time by some unknown amount. Regardless, investors should be ready to go after bargains as they come around. At the end of the day, the week-to-week or month-to-month moves matter less in the grander scheme of things. If you’ve invested through this bear market, now is not the time to throw in the towel, because the calls of the bears are getting louder again.
Even if the summertime holds a rally that propels the S&P 500 to bull market levels (that’s a 20% rally off bottom), it’s smart to be prepared for the next pullback by having some cash in hand that you intend to put to work on a stock that’s on your radar. That’s not to say you should sell to raise cash in anticipation for a devastating decline at the hands of a coming recession, though. I think the coming recession may not be as market-moving as many of us think. It’s been at the top of mind for so many folks for quite a while, after all.
Corrections happen every now and then. Market gurus will attempt to time them, but they tend to hit when we least expect and usually on events that weren’t at the top of our list of worries.
In this piece, we’ll check in with two commodity heavyweights that could help deliver lowly correlated gains in these latter innings of America’s bear market.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is a Canadian energy kingpin that helped land investors a rock-solid gain through a bearish 2022. Though the rally has since ground a bit of a slowdown (shares can’t seem to break the $85 level), I think the next big move will be higher, given the modest valuation and potential catalysts for big oil in a post-recession economy.
Oil has been a wild mover in recent weeks, but when hasn’t it been?
As oil tanks, I’d look to the top-tier producers (like CNQ) on the dip. The stock goes for 7.79 times trailing price to earnings (P/E), with a 4.62% dividend yield. As the new king of Canada’s oil patch, I’d consider the name if you’re a bit light on the energy sector. Yes, CNQ and the big oil firms aren’t ESG (environmental, social, and governance) friendly, but they are value friendly, especially at this juncture.
With a 2.01 beta, just be ready for more volatility than your average stock. As oil swings, so too will the $81.55 billion giant.
Agnico Eagle Mines
Agnico Eagle Mines (TSX:AEM) rallied 3.4% on Thursday, as the rest of the market sunk due to more rumbles caused by the U.S. regional banks. Gold has been an outstanding performer, helping power shares of AEM to an impressive 61% rally off last July’s lows.
At 11.78 times trailing P/E, shares are still way too cheap if you think gold can retain its latest gains. Personally, I’d not be shocked if gold flirts with US$2,200 per ounce. In such a scenario, AEM stock and other gold miners could prove undervalued.
In any case, Agnico is a wonderful way to gain exposure to precious metals.
The firm produced 3.1 million ounces of gold last year, making it the third-largest gold producer on the planet. In the future, I’d look for production to rise as the firm ramps up production while keeping expenses in check. If gold prices rise as production does, it may be tough to keep shares from surging higher over the next three to five years.