The tech-heavy Nasdaq 100 has had an incredible year, thanks in part to the hype surrounding AI. Indeed, the U.S. Federal Reserve (or the Fed) can’t even seem to derail the hype, as it maintained a relatively hawkish stance at the latest Jackson Hole symposium. Even if rates do climb higher, it’s possible that the AI hype can more than offset rate-related investor jitters.
I’m a big fan of exposing your portfolio to AI. I think it’s a real trend that could give investors a growth jolt. However, you need to be careful what price you pay for such exposure. Right now, the obvious plays that talking heads can’t seem to stop talking about seem just a tad too expensive. Yes, the price of admission can always be justified when everybody is thinking many years into the future.
However, I think it’s better to not show up at a party than to arrive before the clock strikes midnight. Indeed, I have no idea what inning we’re in when it comes to the AI trade.
Are there still reasonably priced growth stocks out there?
As everybody else looks to AI stocks, I think investors would be better off giving the neglected, modestly valued growth stocks a second look. It’s these names that can hold their ground should a vicious correction be in store for the AI-centred plays. It’s hard to tell what’s a fair price to pay for certain names.
Fortunately, nobody is forcing you to have an opinion on the plays. Instead of participating in such hot stocks, you may wish to look to lower-tech firms that offer GARP (growth at a reasonable price).
2022 was a reminder that the price you pay for a stock is just as important, if not more so, than the attractiveness of a growth story.
Currently, Dollarama (TSX:DOL) and Quebecor (TSX:QBR.B) are intriguing dividend plays I’d feel more comfortable buying at current levels.
Dollarama: Discount retail’s time to shine!
Dollarama is a discount retailer that proves you don’t need a “sexy” AI play to make solid gains over time. Year to date, DOL stock is up nearly 10%. Over the past five years, shares are up 77%. Indeed, the rough economic environment has been a boon to Dollarama. The growing cost of living has made Dollarama’s value proposition look that much more attractive.
At writing, shares trade at 30.2 times trailing price-to-earnings. I still think that’s a decent price to pay for a company that could continue to do well, especially if Canada’s economy sinks into a recession. At the end of the day, Dollarama is one of the best TSX stocks for all sorts of uncertain economic climates.
Quebecor: Canada’s next big wireless player?
Quebecor stock isn’t exactly a high-growth stock, but it is one that has intriguing growth prospects. The company wants to be Canada’s fourth major wireless carrier.
Though I’m a fan of Quebecor, it will take a lot more than the acquisition of Freedom Mobile to put the Quebec-based telecom toe to toe with the heavyweights in the wireless scene. In any case, I don’t think the long-term potential of a national expansion is priced in quite yet. Not at 12.6 times trailing price-to-earnings.
With a 3.81% dividend yield, QBR.B stock is definitely worth keeping on your radar. Though it could take several years for the growth to move into overdrive, I’d definitely not overlook the name.
