DIY investors working on their nest eggs may wish to consider taking a second look at the many value stocks that may have been neglected amid the glorious ascent of various tech stocks. Indeed, AI is a big deal. And virtually everybody wants a piece of the action.
Despite the growth potential to be had in this trend, I think it will be hard to make considerable sums by chasing what other investors have already chased down. Even if you’re right about certain AI companies and their growth prospects, you could still overpay. Overpaying even for a magnificent company can be a money-losing proposition.
That’s why new DIY investors must always think about valuation. Inflation has impacted our wallets heavily. And if you wouldn’t load up the shopping cart without looking at the price, you shouldn’t just buy any “hot” stock without asking yourself whether the price-to-earnings (P/E) multiple (or lack thereof) is worth what you’ll get.
Speculative momentum investing is fun. But it’s a game that can be harmful to your wealth if you don’t play your cards right. The good news is you need not play such a game. In this piece, we’ll focus on three stocks to grow your nest egg in a slow and steady way. In the game of investing, I still believe that slow and steady will ultimately end up winning the race. The prize for winning the race? A comfortable retirement.
Here are two compelling starter stocks to look at:
Canadian Tire
Canadian Tire (TSX: CTC.A) is slowly moving lower after hitting a 52-week high in April. With a nice 4.12% dividend yield, shares of the legendary retailer have gotten more bountiful to hold over time. While the yield could always get bigger if the stock makes a move to 52-week lows (of around $140), a potential scenario that should inspire investors to stash the name on their watchlists.
Recently, Canadian Tire felt a bit of pressure at the hands of fading consumer appetites for discretionary goods. Inflation is partially to blame, but recession headwinds could be the next woe that could drag the Tire to a new 52-week low.
In any case, it’s hard to say how much of the weak macro is already priced in here. The latest profit slip was not encouraging, but at 11.4 times trailing price-to-earnings, I do believe you’re getting a pretty decent value for your money.
Leon’s Furniture
Leon’s Furniture (TSX: LNF) is another economically sensitive company that’s been feeling the weight of macro headwinds. The stock plunged 40% from peak to trough last year. More recently, shares have been fluctuating wildly in both directions. At around 8.4 times trailing price-to-earnings, with a 3.11% dividend yield, I do view LNF stock as a mid-cap gem that may be falling into deep-value territory.
If rates soar from here and a recession proves more severe, Leon’s could certainly face more pain in the second half. In any case, LNF stock is a top stock to watch for those looking for the economic tides to turn.
