Don’t let the autumn season blues glue you to the sidelines, as the deals to be had on the TSX Index get better. Indeed, rates have been steadily creeping higher in the United States. And they could continue to climb well into the new year. Here in Canada, the Bank of Canada is in a similar situation. The door is open for more rate hikes, perhaps wide open, as it aims to fight off what remains of pesky inflation.
Indeed, inflation has cooled by a lot. But it’s still not close to normal levels. Further, consumer-facing inflation seems to still be a tad hotter than average. For instance, food prices continue to surge, bringing forth calls for the big grocers to do something about it.
Canadian grocery giant Loblaw (TSX: L) may need to put forth another price freeze to win back some of the reputation it may have tarnished amid rampant price increases on various food items. Either way, Loblaw stands out as a company that can do well as lingering inflation sticks around for a while longer.
In this piece, we’ll look at three stocks I’d be willing to consider right here as the stock market pullback (or correction) accelerates into Halloween. Indeed, it’s a scary time for most investors!
Loblaw
First up, we have grocery kingpin Loblaw, which hasn’t done a heck of a lot over the past year and a half. The 2021 surge was remarkable, but as the stock consolidates in the $110-125 region for a while longer, I do think it’s starting to look like a coiled spring that may be ready to bounce higher, perhaps much higher on the back of solid earnings.
The stock is also getting cheap again at 19.1 times trailing price to earnings, with a 1.55% dividend yield. As the market swoon continues into October, I’d not be afraid to take advantage of any dips in one of the most impressive defensive retailers in the country. As inflation and affordability hit consumers, expect Loblaw and Superstore shoppers to keep loading up on goods before the next round of price hikes.
TD Bank
TD Bank (TSX: TD) is a wonderful bank that has been hit with hard times of late, with shares sinking below the $80 per share level once again. The stock yields 4.7% and goes for only 10.3 times trailing price-to-earnings. Given the durable U.S. business and the potential to benefit from higher rates in the form of better net interest margins, I think TD stock ought to be considered after the latest dip.
Indeed, Canadian banks may not be timely as a potential recession approaches. However, they will overcome hardships, and TD, I believe, could be the first of the group to recover once the recession band-aid is ripped off, likely at some point next year.
CN Rail
Finally, we have CN Rail (TSX: CNR), a rail giant that I’ve been pounding the table on in recent weeks following its slide to $145 and change. The stock now yields 2.15% and trades at 18.6 times trailing price to earnings. It’s hard to remember the last time the high-quality rail titan traded at such a multiple.
Even with rail and recession risks, the stock, I believe, deserves to trade at 20-22 times price to earnings. Of course, if we’re in for a harder landing for the economy, CNR stock could still take more punishment. Longer term, though, I think CNR is a fantastic pick now and at lower levels.
