The recession that many talking heads on television will probably touch down at some point over the next year or so. Undoubtedly, timing a recession can be quite difficult. Further, there’s always a chance that it never happens if the recession watchers are looking at the wrong indicators. For now, it seems like a recession will eventually happen at some point. But do not be alarmed, as the coming downturn may already have worked its course.
The stock market really pulled the brakes last year. And given Mr. Market tends to be forward-looking, it may already be focused on the post-recession world, which may also accompany inflation that’s back to more normal levels.
Indeed, the past few years have been anything but normal. But as normalcy begins to set in (on the inflation and economic fronts), I think there are opportunities for brave investors willing to bet on the value stocks that most others would be quick to overlook or pass up on.
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Can you make money, even when a recession happens?
It’s definitely possible, especially after a rather muted year for stocks. Further, there’s a good chance the recession won’t even bring forth the type of “doom and gloom” some bears have come to expect from economic downturns. Sure, corporate earnings growth may hit a snag from here, but that doesn’t mean stock prices are destined to be much lower from here.
The first half of this year has been quite hopeful. With the Federal Reserve taking some sort of incredibly hawkish pause, it certainly seems like rates have begun to work their course. In any case, the Bank of Canada is still going on with the rate hikes. And until it hits the pause button, I think there are plenty of value plays that many are simply neglecting at this juncture.
TD Bank stock: Too much recession risk baked in?
Even if a recession hits deeper, I’m not so sure how much more a stock like TD Bank (TSX:TD) has to fall. The premier U.S.-heavy Canadian bank has been up against it this year, as the U.S. regional bank scare took hold just a few months ago. Indeed, it was a fearful time to be a bank investor.
That said, TD is not only a large bank (with a $148.3 billion market cap), but it’s also well capitalized — perhaps even over-capitalized after the deal with First Horizons Bank fell through.
At writing, TD Bank stock goes for just $81 and change per share. The dividend stands at 4.72%, and the price-to-earnings multiple is at 10.29. Indeed, TD stock is off 25% from its high. Even if the recession proves far worse than we expect, TD has more than enough to ride out the storm. The only question is what TD will do with its extra liquidity if acquisitions are out of the cards for the time being.
TD Bank is swelling with capital, and it could use it to invest organically (perhaps in next-generation technologies) until it’s ready to give mergers and acquisitions another go again. Some experts think another proposed deal could be years away. I’m not so sure. Either way, I like that TD is willing to walk away from a soured deal rather than following through and running the risk of hurting investor value.
