The recession chatter has dominated the headlines for a large chunk of last year. In the first half of this year, recession fears have seemed to take a backseat to the mania driven by artificial intelligence (AI). Undoubtedly, another hot tech trend is all that we need after the euphoric rally that preceded the 2022 stock market selloff, which hit tech that much harder than everything else.
Unlike cryptocurrencies and all the sort, there seems to be a new kind of fear of missing out when it comes to AI. Nobody wants to be lacking in AI once the disruption begins. The disruption could span many industries and deliver massive rewards to the firms that are in the right places at the right time.
In any case, it seems clear that many out there are more than willing to brave a potential economic recession if it means not being left behind in the AI race. Personally, I think investors must be careful where they place their bets in the AI race. I don’t care if it’s the fourth industrial revolution or a game-changing technology with a virtually unbounded total addressable market (TAM); if you overpay, you stand to lose money — perhaps big money.
That’s why it may make sense to cool on the AI trade and have a look at some of the companies that may be next up to the plate once markets bring their focus to the post-recession recovery. Indeed, a recession hasn’t hit yet, but as one of the most anticipated in recent memory, a lot of investors may already be “over” it! We may be closer to the next recession than a year ago, but it certainly seems like the downturn-related anxiety has dissipated a bit.
Canadian Tire
Canadian Tire (TSX:CTC.A) is a retailer that tends to take a hit during recessions, only to come roaring back on the other side. Investors who bought the stock during the 2020 coronavirus market crash were rewarded with very rapid gains. Canadian Tire stock began slipping in early 2007, well before the 2008 Great Financial Crisis struck. Though it took some years to recover, those who braved the decline were eventually rewarded as the company found its footing again and demand for discretionary goods bounce back.
Since peaking back in 2021, CTC.A stock has been slumping. Recently, though, the stock has returned to rally mode. Undoubtedly, analysts covering the name already expect the macro climate to take away from earnings. With low expectations and an economy that may very well be robust enough to shrug off the worst of the next downturn, I view Canadian Tire as a potential value stock to play a post-recession economy before the recession even hits!
The 3.75% dividend yield is a nice sweetener for those willing to ride the retailer through a period of rough times. I’ve praised Canadian Tire in the past, and I’ll continue to do so whether or not recession chatter picks up again going into year’s end.
At the end of the day, Canadian Tire is a Canadian icon that’s been through worse. With a great management team and impressive brand loyalty, I’m inclined to make CTC.A stock my top pick in the Canadian retail space for the second half!
