Don’t ignore the lesser-known mid-cap Canadian stocks, especially as rates begin to fall and macro headwinds start fading gradually over the coming months and quarters. Indeed, inflation has weighed heavily, and while it doesn’t feel any better to do a weekly grocery haul at the supermarket, the fact remains that inflation is nowhere close to the horrid peak endured just a few quarters ago.
Of course, only time will tell how consumers and inflation react to the Bank of Canada’s June rate cut and the two more that may be announced before 2024 ends.
Either way, I think now’s a great time to start thinking about buying some rate-sensitive securities. If you’re looking to create a watchlist of names that could benefit over the next two years, I’d look to the income-heavy telecoms, real estate investment trusts (REITs), and even utilities, which I previously mentioned will also benefit from increased energy consumption at the hands of the artificial intelligence (AI) boom.
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Lower rates are great news for the growth-focused mid-caps!
For younger investors willing to take just a bit more risk, however, I think the high-growth firms could benefit as rates plunge over the next several quarters. At the end of the day, lower rates mean less financial burden on small firms, many of which need to commit a considerable amount of capital to R&D expenditures.
As you may know, R&D does not come cheap. High rates entail budget cuts on future growth drivers and, unfortunately, mass layoffs. As rates turn lower, though, expect some firms to start investing heavily in ambitious projects again.
High R&D spending is the price of future growth, after all. In any case, low rates could be a huge tailwind for the mid-cap growers, many of which seem to be trading at significant discounts at the time of writing. In this piece, we’ll have a look at two magnificent mid-cap stocks that could be primed to perform over the next two years and beyond.
Cargojet
Cargojet (TSX:CJT) is a promising mid-cap growth gem that’s fallen out of favour in recent years amid painful macro headwinds. Undoubtedly, overnight cargo shippers serve many consumers who buy goods online.
With consumers in a rough spot, it’s not hard to imagine many putting their credit cards away for the time being. As rates fall and consumers feel better about going on their digital shopping sprees, I think the e-commerce-related logistics firms stand to benefit greatly. At writing, the stock is up more than 50% from its lows hit back in October 2023.
Still off more than 51% from 2020 all-time highs, though, I see ample runway as CJT stock attempts to leave the tarmac once again. Either way, the $1.9 billion mid-cap firm is a fantastic play, especially after recent news broke that the firm inked a three-year deal to charter flights to China.
Sure, CJT shares look a tad expensive at 50.6 times trailing price to earnings (P/E). However, given the magnitude of earnings growth that could be on the horizon in an economic recovery, I’d argue shares are far cheaper than they look today.
