Value investing isn’t as easy as it seems. Not only is it tough to uncover what’s truly undervalued, but it can take ample discipline to stay invested in a value play until it’s able to “correct to the upside.” Indeed, the discount (to intrinsic value) of a stock can go unrecognized for some period of time. But if you’re confident you’ve spotted value and are more than willing to wait it out, I believe you can be a great value investor. Of course, you’ll learn through experience the true value of long-term value investing.
In this piece, we’ll have a look at two TSX stocks that I view as quite cheap at the time of writing. Though they may not be a timely play to gain big in 2024, I still view them as worthy bets if you consider yourself a long-term investor who wants to tilt the risk/reward scenario heavily in your favour.
Onex
First, we have an investment holding firm that few new investors have likely ever heard of. Onex (TSX: ONEX) owns a wide range of intriguing businesses, including Westjet Airlines. Undoubtedly, Onex has some impressive talent running the show. But even they can’t get the timing right all of the time.
Indeed, buying an airline in the face of a global pandemic recession was probably not the best scenario that could have panned out! In any case, Onex didn’t take an irrecoverable hit to the chin. And once Westjet begins to take off the tarmac again, I believe Onex could get a nice shot in the arm.
Personally, I think Westjet is better in the hands of Onex. With the stock recently blasting past all-time highs, Onex seems like a new mid-cap ($8.2 billion market cap) momentum play on the block. Despite recent upward momentum, I view shares as cheap. After all, 11.2 times trailing price to earnings (P/E) is very reasonable for a diversified asset manager that has a lot to gain in a Canadian economic rebound.
At this pace, I don’t think Onex needs the Canadian economy to avoid a recession to continue adding to last year’s run. The company is a fine momentum and value play right here and one that more Canadians should have on their radars!
Empire Company
Empire Company (TSX: EMP.A) is the grocery play behind such names as Safeway and Sobey’s. The stock has been volatile, to say the least, over the past two years, with the stock down around 9% over the timespan. It’s been a lacklustre ride, especially given some of its peers in the grocery scene have made the most of the last few years of inflation. Taking advantage of inflation as an opportunity to pad profits is never a good idea, at least from a long-term perspective.
Relatively speaking, Empire has done a pretty good job of staying out of the headlights of federal regulators who are fed up with the high costs of groceries. In a post-inflation world, I’d look for Empire to gain over rivals in the grocery scene, given it hasn’t been criticized nearly as much as one of its Canadian grocery peers that I will not name in this piece!
