Here we go again. The stock market plunged on Thursday, thanks in part to big earnings reports from mega-cap tech stocks south of the border. I thought the numbers were actually pretty good. However, whenever you have expectations that are so high, it can take more than just a good number to cause a frothy stock to move higher.
Indeed, the shockwaves have spread to the TSX Index, which fell 0.4% on the day. As the Canadian index falls deeper into a correction, I’d encourage young, long-term Tax-Free Savings Account (TFSA) investors to take advantage of the bargains that pass by. Sure, you could wait for even better deals to come your way as the market selloff continues.
TFSA investors: Don’t fear volatility as bargains grow abundant
That said, there’s no bell that goes off when the market hits bottom. It would certainly be nice! But as an investor, we need to acknowledge that we probably won’t buy a stock at its bottom. And even if we did, it’d be more a matter of luck than skill. When it comes to investment skills, it takes a longer-term horizon (think five to 10 years).
As the great Warren Buffett once put it, the stock market is a “weighing machine” over the long run. In the near term, it’s more of a “voting machine.” With that in mind, let’s get into two Canadian stocks that I think are bargains worth buying now. I have no idea if the market has more downside to go. Regardless, I view the following plays as more than worth consideration while they’re cheap.
TFSA top pick #1: Intact Financial
Intact Financial (TSX: IFC) is a property and casualty (P&C) insurer that’s done incredibly well over the past five years, surging more than 85% over the timespan. Indeed, P&C insurance seems to be doing better than life insurance these days.
Moving ahead, I think Intact has what it takes to keep its market-beating streak intact! The stock is down nearly 8% from its all-time high. It’s not a massive selloff for the insurer but one that I think is unjustified given the firm’s impressive, predictable earnings growth stream.
The stock trades at 25.12 times trailing price to earnings, with a 2.3% dividend yield. It’s not dirt-cheap, but it’s a pretty fair price for what I deem as a pretty outstanding company in the financial space.
TFSA top pick #2: Royal Bank of Canada
Royal Bank of Canada (TSX: RY) is a top-tier Canadian bank that’s been dragged down with the rest of the Big Six of late. A recession is coming, and provisions are creeping higher. That’s bad news for the banks. And though they’ve really tested our patience, with shares steadily moving higher in recent years, I don’t think it’s wise to give up on them.
Not while their dividend yields are swollen by so much! At writing, RY stock goes for $110 and change, with a 4.9% dividend yield and a modest 10.66 times trailing price-to-earnings multiple. The stock’s off more than 25% from its high, and though there’s no bottom in sight, I’d not be afraid of stashing this falling knife of a blue chip in a TFSA.
A Canadian recession will weigh down even the most robust bank. But when tides inevitably turn, count on Royal to be a leader.
Bottom line
There’s a lot to pick from for TFSA investors looking to top up their portfolios. Royal Bank is a slightly better buy than Intact. However, I wouldn’t be against owning both financial stocks at these levels.
