Whenever the headlines start using the word “recession,” investor sentiment could take a big turn lower. As a DIY investor, though, it may be one of many signs that the market may be a tad overly pessimistic. And if things are a bit too gloomy, you may have a chance to put your contrarian hat on and pick up shares of a company at a compelling discount.
Indeed, recessions can entail a great deal of volatility and pain for investors. But if you’re in it for the long run, you’ll be able to ride things out to a recovery. So, if you’re not retired or plan to retire sometime soon and don’t need to show off your short-term investment performance, I’d argue a recession and prolonged period of market weakness could be a good thing for you in the grander scheme of things.
Recession fears could pick up again, but that could bring forth buying opportunities
You see, some of the smartest investors on the planet know that their moment to shine is when the markets get wobbly. Although it may not seem like it, bear markets are times when you, as an investor, can set your future self up for a solid ride higher.
As share prices go down, the abundance of market bargains is bound to go higher. But you will need to brace for turbulence and focus on the next 10 years, rather than the next four quarters. With a long-term mindset, I do think Canadian investors can do well, regardless of what the economy or the market serves up on a month-to-month basis.
At this juncture, TFSA (Tax-Free Savings Account) investors may wish to consider shares of quick-serve restaurant firm Restaurant Brands International (TSX: QSR) and Royal Bank of Canada (TSX: RY).
Restaurant Brands International
Restaurant Brands’ stock is in correction territory, now down over 15% from its recent high. Not surpisingly, as the fast-food scene has been under pressure of late, and it’s no mystery to see QSR stock dragged lower as it touched a ceiling of resistance at $102 and change per share. Indeed, the economy is acting sluggish, and weight-loss drugs seem to be curbing the appetite for junk food, or even food in general. Personally, I think weight-loss headwinds facing food plays are overdone right now.
At the end of the day, a recession bodes well for value-conscious fast-food chains like Burger King, Popeye’s, and Tim Hortons. All considered, I view QSR stock as absurdly undervalued at 19.4 times trailing price-to-earnings. The best part? The 3.44% dividend yield is a bountiful side to the impressive growth story!
Royal Bank of Canada
Royal Bank of Canada is a blue-chip dividend titan that would make an excellent long-term core holding to any TFSA fund, especially on a dip. Right now, the stock is near new multi-year lows at $115 and change per share.
The stock is down more than 21% from its high and could be in for a hailstorm of turbulence as quarterly earnings come due. I think the turbulence is worth riding out. The stock trades at 11.2 times trailing P/E, with a 4.64% dividend yield. I think RY stock is a behemoth-sized bargain right here. Just don’t expect a turnaround anytime soon.
