The stock market has come a long way since its lows of last year. And though valuations may be suspect in certain areas (think the AI plays that have doubled in a hurry!), I don’t think investors should be sidelined as other opportunities come their way.
AI and tech aside, stocks aren’t really that expensive. In fact, you could find a dividend stock with a yield well above its historical range. Further, there are some value plays that sport price-to-earnings multiples in the single digits. Dismiss them as value traps, if you will, but I do think taking a raincheck on stocks just because of recession fears could cause you to miss out on solid gains.
In this piece, we’ll look at three stocks that may be close to bargain-basement levels. Of course, no company is fully immune to the impact of a recession. Although a U.S. recession seems somewhat less likely, a Canadian recession may still work its way through over the next 18 months. It’s unclear when the recession will hit, but it will likely be less of a doozy than past downturns.
Without further ado, let’s check out two value stocks that I think are worth picking up going into the late summer!
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Alimentation Couche-Tard
Shares of Alimentation Couche-Tard (TSX:ATD) are down only 3% from all-time highs of around $68 per share. Still, I view it as a bargain. Why? Even though the stock has risen considerably over the years, the price-to-earnings (P/E) multiple continues to hover at incredibly depressed levels. At writing, ATD stock goes for 16.3 times trailing P/E.
That’s just too low for a company with a track record of driving considerable synergies through M&A. The balance sheet is sound, and more deals are likely to be announced over the next two years. As the management team works its magic with its newly acquired assets, expect earnings to keep surging higher.
Indeed, ATD stock is not in a “sexy” field. Convenience stores are a rather boring, simple business. That said, I think investors ought to respect the company’s fundamentals, growth, and outstanding financials. Its growth story is sustainable, and I find it tough to ignore the stock at the pace earnings are rising.
At the end of the day, I’d rather higher earnings propel a stock higher than just multiple expansion. In that regard, ATD is one of my favourite plays.
IA Financial
IA Financial (TSX:IAG) stock is fresh off a 7% dip. The latest second-quarter earnings results failed to impress, and the stock could find itself back in the low $80 range as the slip intensifies. Core earnings per share (EPS) came in at $2.39, up 3% year over year. The numbers were not bad, but as recession fears begin to spread again, I do think IAG stock’s latest pullback could extend a bit. The stock yields 3.4%, which is enticing for value seekers who seek passive income.
For now, the $8.9 billion mid-cap financial seems a tad risky. Regardless, I find it hard to pass up on the relatively well-run insurance and wealth management company. It’s done far better than some of its insurance peers in recent years, a trend I expect will continue for some time.
