With the S&P/TSX Composite Index down 4.1% in the past five days, many stocks are down significantly more. However, market volatility can be your friend. That is especially true if you invest with an extended time horizon.
Stocks are ownership stakes in businesses
A stock is a stake in a business. Just because a stock rapidly falls (or climbs) doesn’t mean that the intrinsic value is lost (or gained). Long-term investors can benefit from this arbitrage.
Market drawdowns don’t last forever. The market is generally quick to remember high-quality businesses. While they can fall (like all stocks do), it generally is short-lived. High-quality stocks tend to bounce back.
Warren Buffett has said, “Time is the friend of the wonderful company, the enemy of the mediocre.” If you can be a little bit patient, here are two wonderful long-term companies worth buying today.
A top Canadian blue-chip stock
Canadian Pacific Kansas City (TSX: CP) stock is down 6.5% in the past five days and 7.5% over the past six months. Any further declines could present an attractive entry point for patient investors.
Canadian Pacific has been in business since 1881. If you want a business that can last the test of time, CPKC is a great stock to pick.
North America is a big place. There is simply no other cost-efficient way to ship bulk commodities and goods across the continent than by rail. As a result, this business should remain relevant to society for many decades ahead.
The great news is that CP just got significantly larger (and better) after it acquired Kansas City Southern’s transport network. CPKC now has a railway that extends across Canada, the U.S., and Mexico.
Mexico is increasingly becoming a manufacturing hub for North American companies. CPKCs new network is perfectly positioned to benefit from the import and export of goods from Mexico to the U.S., Canada, and internationally.
CP’s long-standing leadership team has delivered above-industry-average revenue and earnings per share growth. Likewise, its focus on on-time, efficient railroading has helped it earn an industry-leading operating ratio.
The company is expecting to double its earnings in the next four to five years. With a strengthening balance sheet, shareholders are well-positioned to benefit from solid, low-risk growth in the years ahead.
A pick for value, growth, and income
Another stock worth buying at a big discount today is Calian Group (TSX: CGY). Its stock is down 5.5% this year and 14% in the past 52 weeks.
With a price-to-earnings ratio of 10, it is trading close to its lowest valuation in five years. That is despite Calian expecting to grow adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) by 30% in 2024.
Calian operates a diverse mix of businesses that serve governments, institutions, and the private sector. The company has delivered solid organic growth, but acquisitions have helped diversify its revenue mix, expand margins, and increase the stability of its earnings.
Last year, the company had a bit of a quarterly earnings misstep that took the stock down. Since then, the company has been executing very well.
Unfortunately, the market has seemed to yawn. If you can look past the near-term share weakness, this is a great stock for value, growth, and income (it has a 2.1% dividend yield).
