The broader markets are sure to be a wild ride as we head into the second half. Though the rally may be showing some signs of burning out, I think value investors should be ready, with cash in hand, to buy value stocks on the dip. Indeed, there are plenty of great bargains that exist today. If a broader market correction drags them down further, one can improve their risk/reward scenario. Indeed, it’s always nice when a cheap stock gets that much cheaper.
As a value investor, it’s a nice idea to prepare a shopping list, so you’re ready to pounce when the time comes. Greed can turn to fear in such a hurry. Remember when markets nosedived back in February and March of 2020? Such panic can happen in markets. We can’t time downturns. We can only be ready to capitalize on the short window of opportunity they present.
These days, I still see great opportunities. But one should always be ready for such deals to become even better if the markets experience a bit of a tantrum. Regardless of the reason, value investors must be ready to go. In this piece, we’ll go over three value stocks I’d not be afraid to start buying right now. And what if a correction hits in a month or so? I’ll be happy to buy even more shares.
Whenever you can buy a stock and hope that it goes lower so that you can buy even more, odds are, you’ve done the homework. The more homework you do, the less emotional you’ll get when the rest of the market sours on stocks.
Without further ado, let’s consider the following two value plays for July 2023:
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Canadian Tire
Canadian Tire (TSX:CTC.A) is an old-time retailer that’s come a long way since its auto-focused days. These days, Canadian Tire is a go-to for a broad range of discretionary goods. As retail and the financial business feel macro headwinds, earnings could stall again. Regardless, I think the next expansionary cycle could be a huge boon to the stock. Yes, it’s frustrating to hang onto a stagnant stock that’s up only 4.8% over five years.
That said, I like where Canadian Tire is headed. Its book of exclusive brand offerings is growing. And with a loyalty program in place, Canadian Tire seems like the ultimate omnichannel retail recovery play. Finally, there’s the 3.78% dividend yield.
Spin Master
I think it’s time to take Spin Master (TSX:TOY) stock for a spin amid its latest tailspin (please, forgive these puns!). The stock’s down 21% over the past year and could be at risk of hitting 52-week lows again in the low-$30 range. Undoubtedly, Spin Master’s a toymaker that’s felt the weight of a troubling macro on its shoulders. All signs point to a weakening consumer, as the recession moves closer and closer. Still, whenever there’s so much pessimism, I think you need to start getting optimistic about what can go right.
When the consumer turns, they can turn quite quickly. Once the recession works its course, the market may already be focused on the recovery. Indeed, at 12.9 times trailing price to earnings, I view the $3.55 billion firm as tremendously underpriced, given the brands and inventory relief that could be in the cards by the holidays.
Will the holidays of 2023 be incredible? Probably not. But with estimates muted, I’d not be shocked if the stock rallies on the back of a better-than-feared season.
