September is a great time of the year to be a contrarian investor with a nose for value. Indeed, every September seems to act as a pair of brakes for the broader stock markets. Though I’m not a big fan of investing based on seasonal trends, I think it’s hard not to be tempted as a value investor by the recent slip in stocks.
I have no idea if September’s weakness will carry over into October. That said, as a long-term investor looking to build wealth for the next five years and beyond, I think the September sagging in markets is an opportunity to revisit the list of stocks atop my radar.
In this piece, I’ll share two names on my watchlist that I believe are undervalued and ready to rip higher over the next 12-18 months. Though there still may be turbulent times ahead as negative market momentum picks up, the following plays seem too good to pass up, even in the face of shifting investor sentiment.
Remember the artificial intelligence (AI) enthusiasm? It’s been quite muted of late, which I view as a good sign. AI tech is a big deal. But pay too much for exposure, and you’ll still probably lose a great deal of money.
In this piece, we’ll check out one stock with skin in the AI game and one that’s low tech but still worthy of growth over the long haul.
Amazon
Up first, we have Amazon (NASDAQ: AMZN), an absolute staple for any investor, Canadian or American, for its e-commerce, cloud, and, more recently, generative AI exposure.
The stock is doubling down on generative AI tech in a big way, with its latest US$4 billion stake in AI firm Anthropic. I think it’s a big deal that should grab investors’ attention. Though Amazon is not cheap at more than 105 times trailing price to earnings, I think it’s tough to neglect the stock now that it’s fresh off a quick correction from 52-week highs.
Further, I think we’re reaching a point where it’s not so far-fetched to think that Amazon could pull ahead of the pack in this AI race. At the end of the day, Amazon is a disruptive tech innovator. Add AI into the equation, and the company becomes that much scarier through the eyes of its rivals.
In short, Amazon is a wonderful tech titan that looks to be on sale after the dip. Its AI potential is impressive and may help it dominate as the boom continues.
Restaurant Brands International
Restaurant Brands International (TSX: QSR) isn’t a red-hot AI play, but it is a firm that can grow steadily, regardless of what the economy is up to. Indeed, Restaurant Brands is behind Tim Hortons, Burger King and Popeyes Louisiana Kitchen, a good sample of the fast-food market.
There’s a lot to love about the defensive growth story. However, investors seem to be souring on the stock in recent months. Shares fell around 12% from their 52-week highs, just shy of $103 per share. The dividend yields 3.24%, and shares go for a modest 20.54 times trailing price to earnings. I think the recent decline makes little sense and should be viewed as an opportunity for investors looking to do well in a rocky final quarter of 2023.
The company is back in growth mode, and it’ll be interesting to see how earnings fare as the firm ramps up on various expansion efforts.
