When it comes to your Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP), you should be focused on the next 15 years. Not just the next 15 days, weeks, or even months. Undoubtedly, investing is a game, where the odds can favour those with longer-term time horizons. As a long-term investor, you’ll feel less inclined to “chase” returns and find yourself on the receiving end of those nasty selloffs.
The 2022 technology sector selloff was fierce. It dragged the broader S&P 500 into a bear market. Though we’re technically in a new bull market, with tech stocks leading the way, investors must always be ready to back away from that buy button anytime the herd crowds into a trade.
Indeed, if you went against the grain last year and find yourself sitting on a fat gain, it may not hurt to take some profits, perhaps with the intention to get back in at a lower price.
If you’re not comfortable with taking profits or still see additional upside from current levels (you may need to readjust variables in your financial models), feel free to sit on your hands. There’s nothing wrong with letting your winners rise — so as long as you don’t get greedy and deploy new capital at prices above your estimate of its underlying value.
As Warren Buffett once put it, “The weeds wither away in significance as the flowers bloom.” Undoubtedly, your losers take care of themselves. And you may wish to pare them. However, your winners (or flowers) tend to really take care of themselves. In that regard, you may not wish to trim away at the beautiful flowers that have bloomed in your TFSA.
In this piece, we’ll look at one Canadian growth stock that I believe is a blooming flower that could continue to please investors with its beauty over the next five, 10, even 15 years.
Aritzia: A growth stock for the ages?
Aritzia (TSX:ATZ) is a women’s clothing company that recently fell 36% from its November 2022 highs and more than 41% from its January 2022 highs. The chart has been an ugly stomach-churning roller-coaster ride. However, it’s one that may be worth hopping aboard as shares begin to trough out. After such a substantial decline, the “drop” in the roller coaster tends to be less horrific for investors with new money.
I’m not sure when Aritzia stock will turn the corner. That said, I am a fan of the long-term growth plan, as the company looks to find success in markets in the United States. Now, fashionable retail can be a very unforgiving place to invest, especially if you’re unaware of the downside risks in the face of economic turmoil.
Aritzia has built a strong brand (and with that, margin power) for itself over the years. Looking forward, the company is really narrowing in on the in-store experience. Remember, retail is more about just online, it’s all about the omnichannel. And in that regard, I believe Aritzia is on the right track as it spends to improve the customer experience.
As a likely recession adds a weight to retailer’s shoulders, margins could take a hit, as the discount rack begins to fill. Regardless, the recession won’t last forever, even though the negative momentum seems alarming.
UBS recently slapped ATZ stock with a buy rating and a nice $51 price target. That’s more than 45% returns from Friday’s closing price.
