RRSP (Registered Retirement Savings Plan) investors shouldn’t flinch whenever Mr. Market gives them an opportunity to buy some of their favourite stocks at a nice markdown.
Indeed, it is a September to remember for the bears, with stocks shedding considerable value after a hot start to the year. I have no idea what the final quarter holds for stocks. But I think long-term investors should be ready to take action as stocks continue to roll over under the weight of broader market fears.
At this juncture, I think the fear is excessive, to say the least. But for bargain hunters, this is the type of market where we thrive. In this piece, we’ll check out three cheap stocks that have wide enough moats to shrug off the disruptive force of new technologies (think generative artificial intelligence). It’s these moat-worthy stocks that are great buys on dips for holding periods upward of 10 years.
Without further ado, consider the following industrial plays while they’re down and out.
CN Rail
CN Rail (TSX: CNR) used to be the envy of the railway industry. Nowadays, it’s stuck in a funk, with the stock doing nothing in around two years. Wednesday’s turbulent session of trade saw CNR stock sag 1.8% to $146 and change — close to a 52-week low. Undoubtedly, there’s concern brewing about a potential recession on the horizon. Still, I think the 18.8 times trailing price-to-earnings multiple on shares is disrespect, given the company’s ability to stay resilient through the harshest of economic storms.
The 2.11% dividend yield makes CNR a preferred way to play the rail scene. Though management could do a better job of improving its operating ratio, I’m primarily a fan of the durable assets and the longer-term trajectory. Whether CN Rail sees further changes to the helm over the next decade remains a mystery. Either way, I’m standing by the firm as the valuation contracts to absurdly depressed levels.
TFI International
TFI International (TSX: TFII) is a less-than-load trucker that’s been quite efficient in recent years. Despite macro headwinds, the stock has powered its way to a more than 25% gain year to date. Indeed, shares slipped around 8% more recently, making the transport firm worth a second look as it looks to drive higher, even in the face of harsher headwinds.
The $14.75 billion company sports a 1.1% dividend yield and trades at a modest 17.65 times trailing price to earnings. Not at all expensive for such a high-calibre logistics play that’s found a way to keep moving higher over the years.
Norfolk Southern
Finally, we have an American rail play in Norfolk Southern (NYSE: NSC), which is down over 20% year to date. Indeed, shares appear even cheaper than CN Rail at this juncture, going for 17.6 times trailing price to earnings. The 2.75% dividend yield is also slightly larger.
Indeed, Norfolk stock has shed around a third of its value already. And though the recent Ohio derailment has been a major setback, the chief executive officer is focused on improving its safety track record moving forward. Personally, I think the stock is a bargain here if you’re looking for a rail at an even lower price than the Canadian ones.
