The broader TSX Index took a big slip on Tuesday’s session as the inflation number came in a tad hotter than expected. Undoubtedly, just when you thought the inflation dragon was slain and that interest rates could go no higher, Canada got hit with 4% in inflation for the last month.
Indeed, August’s 4% rate was considerably higher than the 3.3% posted in July. Further, consumers at the grocery aisle are likely feeling even more pain as the nation’s top grocers are pressured to do something about the absurd price hikes.
Let’s have a look at two intriguing value plays that TFSA (Tax-Free Savings Account) investors may wish to consider as the September stumble continues.
Loblaw
Indeed, Loblaw (TSX: L) has felt a bit of the heat amid scorching-hot levels of food price inflation. The grocer, which is known to have many low-cost food items (think the private label brands like No Name), has also been making rounds on social media for outlandishly priced goods caught on camera by certain consumers. It’s not good press for Loblaw. However, I do think Loblaw is poised to keep on benefiting from this turbulent economic environment.
As inflation lingers, I suspect more people will shop at the likes of a Loblaw (think No Frills or Superstore) versus a pricier organic grocery retailer. Even if Loblaw is strong-armed to lower its prices, I simply do not see a scenario where the stock sags in the face of a potential recession that could prove worse than the market is currently expecting.
Yes, we all want a soft landing, but nobody knows if we’ll get one, as the Bank of Canada (BoC) looks to add a few more rate hikes into the mix over the coming months. For now, the BoC is leaving the door open, and they’re right to do so, even as folks with outstanding debt balances feel even more of the pinch.
Either way, Loblaw stock trades at just 18.4 times trailing price-to-earnings alongside a nice 1.54% dividend yield. That’s a good value given where we’re at in the business cycle (likely late stages).
Sun Life Financial
Up next, we have Sun Life Financial (TSX: SLF), a Canadian life insurer that’s been feeling the wind to its back since late August. Though shares haven’t gone far since the pre-pandemic peak of around $66 per share, I do think the firm looks well-equipped to survive this stormy September season. The company’s latest quarter saw decent results coming from its Asian division. Should the Asian economy continue recovering, things could get a whole lot brighter for Sun Life.
The group health and protection segment has also been a strong point for the firm of late. Despite the promising results, TFSA investors should stay patient with the firm, as it attempts to navigate through what could be a harsh economic climate in Canada.
At writing, the stock trades at 13.6 times trailing price-to-earnings, with a 4.41% dividend yield. Given its robust quarter and modest multiple, I view shares as a great way to play a post-recession recovery.
