2 Retail Stocks That Could Enjoy an Upside Correction

Walmart (NYSE:WMT) and Canadian Tire (TSX:CTC.A) are compelling retail stocks that are starting to look intriguing.

| More on:
Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks

Image source: Getty Images.

Whenever we have a stock that falls too hard, too fast, an upside correction — the opposite of a correction, which entails a sudden 10% fall in stock prices — may be in order. Indeed, stocks have been quite volatile, and they could remain this way going into 2024.

Volatility isn’t necessarily a bad thing, though. The wild ride may make investors a bit uneasy from time to time. But, at the end of the day, it’s wild swings that tend to allow contrarian value investors more opportunity to spot discrepancies between a stock’s price and its intrinsic value.

Further, many of us forget that volatility works both ways. Stocks can stumble sharply, but they can also surge without a moment’s notice! Take the November 2023 stock rally as an example of volatility that nobody on Bay Street will complain about!

The retail scene has been a choppy ride amid shifts in consumer-spending patterns. In the face of uncertainty, many consumers may be more conservative with how they spend their money, opting to prioritize necessities and high-value items on one’s personal budget.

When times are good, discretionary goods and big-ticket durables may be more in demand. However, when you’ve got folks worried about a potential fall into a recession, you should expect the discretionary retailers to sink while defensive retailers (think grocers and discount retailers) get a nice jolt.

In this piece, we’ll look into two robust retailers, Walmart (NYSE:WMT) and Canadian Tire (TSX:CTC.A).


Walmart is an American big-box retailer that’s done quite well amid the past few years of high inflation. The company, known to offer great deals for customers, also has a grocery business that can help keep it on stable legs through challenging economic times. Though groceries can help retailers like Walmart navigate tougher environments, the margins tend to be thinner.

More recently, the stock slipped following an unimpressive quarterly earnings report. Indeed, margins may have faced a bit of pressure. And as the health of the consumer improves, it doesn’t seem like Walmart has as much to gain.

A lot of positivity was baked in prior to the quarterly flop. In any case, the stock remains fair-valued now at around 26.4 times trailing price-to-earnings (P/E). If you’re looking for an all-weather type of investment, the stock (and the 1.45% yield) may be worth picking up.

Canadian Tire

Canadian Tire is a more discretionary retailer to play the domestic economy. The stock is cheaper and has more to gain if good times are coming back for the consumer in 2024 or 2025. The stock trades at a dirt-cheap 14.3 times trailing price-to-earnings, which I don’t think makes a lot of sense given the company’s relentless investment in e-commerce and loyalty over the years. Partnerships to bring U.S. brands to Canada are also a major plus for the iconic retailer.

Like many other physical retailers, Canadian Tire could leverage its tech-savvy to jolt sales over the long run. As the company trims costs and goes into savings and efficiency mode, the firm may be setting itself up for a nice quarter at some point down the road.

Certainly, a stronger economic landscape for the new year would help. Regardless, there’s not much expectation priced in. And whenever you have low expectations, you may very well be able to get a positive surprise.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Walmart. The Motley Fool has a disclosure policy.

More on Investing

growing plant shoots on stacked coins
Dividend Stocks

4 Ways to Grow $100,000 Into $1 Million in Retirement Savings

Anyone can build a million-dollar retirement portfolio. Here are four ways you could practically grow $100,000 to $1 million.

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Steer Clear: This Stock Spells Trouble

A newly listed cannabis stock is outperforming in 2024 but investors should stay clear to avoid trouble and losses.

Read more »

Red siren flashing
Energy Stocks

Buy Alert: 4 Reasons Why TC Energy Stock Is a Must-Own Now

A large-cap energy stock is a strong buy today for four compelling reasons.

Read more »

Shopping and e-commerce
Tech Stocks

Is Lightspeed Commerce Stock a Buy Now?

Despite the near-term weakness, I am bullish on Lightspeed due to its solid fundamentals, healthy growth prospects, and attractive valuation.

Read more »

A shopper makes purchases from an online store.
Dividend Stocks

3 Reasons to Buy TFI Stock Like There’s No Tomorrow

TFI stock (TSX:TFII) had a hard 2023, but now it's set up for a solid 2024, with an acquisition that…

Read more »

Dividend Stocks

5 Secrets of TFSA Millionaires

These lesser-known secrets can help you set up the perfect long-term portfolio and achieve a million-dollar TFSA!

Read more »

Canadian stocks are rising
Dividend Stocks

iShares S&P/TSX Capped REIT Index ETF (TSX:XRE): Why I Like this ETF Better Than a Rental Property

XRE is a great ETF for gaining exposure to the Canadian real estate sector.

Read more »

analyze data
Dividend Stocks

How to Build a Powerful Passive-Income Portfolio With Just $20,000

These fundamentally strong TSX stocks have paid and increased their dividend in all market conditions. Add these stocks to build…

Read more »