There are plenty of intriguing value stocks out there, even as the TSX Index market rally begins to run out of steam. A Canadian recession may still be in the cards for 2023. But new investors don’t need to “freeze” and wait around for it to end before there’s any chance of avoiding substantial losses. If you stick with stocks that you believe are priced below what they’re worth, a shallow or mild recession may be unable to derail your retirement plan.
Can recessions drag your portfolio into a rut that could take years to climb out of?
Sure, but recessions vary in severity. These days, many expect the coming recession to be more of a minor road bump than a massive ditch in the road. With that in mind, let’s have a look at three value stocks that I think could outpace the TSX Index from here over the next two years.
Cineplex (TSX:CGX) is a movie theatre firm that’s struggled through the pandemic-era disruption. Fast forward to today, and things are nearly back to normal. With a stronger movie slate and plenty of perks for its CineClub members, I don’t view a mild 2023 recession as detrimental to Cineplex in the slightest. COVID-era lockdown was pretty much as bad as it gets for the cinemas.
Though Cineplex faces stiff competition from video streamers, I think a strong slate of films will get people off their couches and going over to the local big screen. Cineplex has been through a lot of turmoil. As it looks for ways to trim away at operating expenses, I think the firm can find a way higher from here. Who knows? Artificial intelligence and automation may help Cineplex sustainably cut operating expenditures en route to greater margins.
The movie business can get hot and cold. The key for Cineplex is keeping costs low and keeping members entertained. Longer term, look for Cineplex to keep investing beyond the box office for greater diversification.
Jamieson Wellness (TSX:JWEL) is more than just a vitamin maker, it’s a firm that’s really going big on the wellness trend, with new products like protein supplements, probiotics, and more. Health and wellness will ride high on a secular trend. However, a recession and high inflation could curb demand for Jamieson products, as people look to save money where possible on generics or private labels.
Though I believe Jamieson is worth the premium price for its superior product, it’s hard to avoid the effects of belt-tightening consumers these days. They’re reaching for cheaper options to deal with ridiculously high costs of living. Private labels and generics have really thrived. Still, I think Jamieson will be back to thriving again once the recession ends and it moves forward with its Chinese expansion.
With shares down around 26% from their 2020 highs, I’m very tempted to step in with a contrarian position. At 26.8 times trailing price-to-earnings, shares boast a nice 2.11% yield. The slump may have dragged on for more than two years. That said, I think the long-term growth prospects are too good to ignore if you’re willing to ride out a mild recession, which may already be priced into the share price at this juncture.