I’d encourage TFSA (Tax-Free Savings Account) investors to invest for the long haul with stocks they view as incredibly undervalued rather than chasing red-hot tech stocks that may be just a tad ahead of the skis. Of course, growth drivers and disruptive innovations can be the formula for market-beating gains. But if you’re late to a trade (let’s say after a more than 100% pop in a year or less), the risks of overpaying are real. And if you take a big loss in your TFSA, you won’t be able to offset gains elsewhere in other accounts.
Though it’s tempting to chase hot stocks, I’d argue your TFSA should be left for the cheapest stocks that can help enjoy capital appreciation and dividends for years (or decades). Remember, it’s the long-term game that really counts!
In this piece, we’ll check in on two value stocks on the TSX that I think would be good fits for TFSA investors looking to double down on value as certain portions of the market (most notably artificial intelligence, or AI, driven tech) get a tad lofty, with rallies that may be getting long in the tooth.
The following plays, unlike the high-momentum AI stocks, are relative laggards. And while they may have their fair share of issues, I view them as solvable and more than priced into shares at this pivotal moment. Let’s check in with the names already.
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Spin Master
Spin Master (TSX: TOY) stock has held onto that sinking feeling since April struck. With shares now at $29 per share following the latest reaction to a tough quarter that saw the firm lose almost US$55 million, I think long-term value investors have plenty of reason to jump in right here, even though Spin’s become more of a falling knife than a stock stuck trading sideways.
Though the reaction to the number was mixed to negative, I think that there is hope as Spin looks to do its best to weather what remains of the industry hailstorm. You can’t really blame Spin for the rough patch. The toy industry seems to be in shambles these days. The good news is Spin still has the means to wheel and deal as the industry continues taking jabs to the chin.
The recent Melissa & Doug (a children’s toy maker) acquisition helped give a nice jolt to quarterly sales. And as Spin is a known consolidator of legendary toy brands, I’d look for the firm to explore more synergy-rich opportunities out there. Don’t expect any such deals to pay off overnight, though, as Spin is very much a long-term value play.
Aritzia
Aritzia (TSX: ATZ) stock has been back on the retreat over the past week, now down more than 10% since its May 7th monthly high. The women’s clothing retailer recently received some praise from fellow Fool contributor Karen Thomas, who’s bullish on the company in the second half as it looks to hang onto gross margin gains. Indeed, I think Thomas is right in that Aritzia is a better buy relative to the likes of other high-end apparel retail plays right now, while macro headwinds are still weighing heavily.
Though it could take time for Aritzia to gain traction again after that sharp January spike, I think the odds are in favour of the bulls in the second half, especially if industry dynamics improve and the firm has a chance to flex recent operating efficiency improvements.
