2 Cheap Stocks to Buy This Summer as Interest Rates Fall

The TSX Index’s hot start to summer may have room to sizzle further. Indeed, the Canadian index had a big day on Wednesday, surging 1.4% in a single day in what was a solid day on both sides of the border. Indeed, it seems like those interest rate cuts will be coming in the U.S.

As the Federal Reserve looks to take action later this year, perhaps the Bank of Canada may feel just a bit better about closing the year with a second rate cut. Either way, inflation is far tamer today than a year ago. However, the final push to get inflation sustainably below 3% could entail a bit of market choppiness and perhaps somewhat less dovish commentary from Canada’s central bank.

Remember, lower rates are really good news for mid-cap firms, which tend to feel the hit of interest payments on debt more than their large-cap counterparts.

In any case, rates are already heading lower. Though the timing of rate cuts number two and three is uncertain, I think that the markets may have legs to keep on marching to new heights this summer. With the TSX Index just one big day away from making all-time highs, questions linger as to where new Canadian investors should look for deeper value.

Indeed, there are still a lot of cheap plays scattered throughout this market. They may not be the most exciting in the world, but they do have big potential to rally in the second half, perhaps on the back of mounting rate-cut hopes.

In this piece, we’ll tune into two intriguing value stocks this summer.

Cargojet

Cargojet (TSX:CJT) stock has been starting to lift off the tarmac again, now up more than 40% in the past year alone. Despite the bounce, shares are still well off (more than 40%) their all-time highs seen all the way back in 2020. Indeed, the lockdown tailwinds really helped the cargo airline boom. With things back to normal and the stock’s valuation “reset,” I think long-term growth investors have a lot to love with the $2.2 billion mid-cap sensation as the rally looks to pick up velocity.

Indeed, consumers still aren’t spending as much. But once they’re in a healthier spot (after a few rate cuts, perhaps), Cargojet will be there to ship goods in a timely manner. I think the stock’s cheap at 27.6 times forward price to earnings (P/E), given its growth prospects in a recovering economy.

Leon’s Furniture

Up next to the plate is a mid-cap Canadian furniture retailer, Leon’s Furniture (TSX:LNF), a firm behind banners such as The Brick and, of course, Leon’s. Given the turbulent consumer market and inflation’s impact, the stock has been far more resilient than I would have thought.

At the time of writing, shares of LNF are up close to 23% year to date. Now down just shy of 8%, I think investors may wish to play the well-run furnishing play for a breakout. Indeed, Leon’s may be a discretionary retailer, but one that’s dominant, with competitive prices and some pretty high-quality offerings relative to the likes of other Canadian rivals.

All considered, I view LNF stock as a bargain at 11.1 times trailing P/E. The 3.13% dividend yield is a cherry on top!