The broader stock market’s relief rally is showing subtle signs that it’s starting to run out of steam. Indeed, the ricochet we enjoyed through the middle of August was quite sharp, rewarding dip-buyers with quick gains and leaving many panic sellers in a tough spot.
Undoubtedly, it’s never a good idea to follow the herd, even if you heard a bearish pundit ringing the alarm bell over relative overvaluation and the pains that could be ahead.
Though only time will tell if the latest relief run will end in tears, I think that new investors should concentrate on finding individual names that are undervalued and can do well, regardless of how the market fares for the rest of the year. It’s quite easy to get caught in the macro headwinds and sell off shares of perfectly good companies just because the bearish headlines are leaving you in a bad state of mind.
While it’s only smart to be ready for the next market correction, I believe that trying to time one is a proposition that could weigh you down. Investing is more of a marathon than a short sprint. As such, you should be prepared to deal with corrections and horrific crashes that are going to be on the path that leads you toward a more comfortable nest egg.
AI stocks could fall under growing pressure as the heavyweights fall to the canvas
Undoubtedly, there will be the occasional sector bubble that’ll blow up and cause pressure on the rest of the markets. Such bubble bursts, I believe, can cause certain well-run firms to be thrown into the bargain bin. And with Nvidia (NASDAQ:NVDA) retreating after delivering a solid quarterly earnings beat, plenty of the artificial intelligence (AI) stocks could be in for a beating before September arrives.
Arguably, any such damage to AI and tech stocks is more of a golden buying opportunity for long-term thinkers than a reason to lose sleep over. Yes, there’s going to be extreme volatility if you aim for AI stocks on weakness. And you are highly unlikely to catch the bottom in a falling knife of an AI stock unless, of course, you’re incredibly lucky. Either way, investors seeking to get in on the AI action should look to do so in a slow and steady fashion as the AI-focused selloff looks to enter its next innings.
Though volatility has picked up again as we head into the end of August, investors should hold their noses and at least form a list of stocks they’d be willing to buy on continued weakness. Here’s one Canadian AI stock that I think may already be trading at a decent discount.
Docebo
Docebo (TSX:DCBO) is one of those lesser-known software companies that’s spending a great deal on AI innovation. Like other AI plays out there, shares have been hit with a tidal wave of choppiness. On Wednesday, the stock crumbled 5.55% in sympathy with the tech scene. Now down 48% from all-time highs and 22% from 52-week highs, DCBO stock may be the TSX AI stock to think about nibbling on the way down.
Of course, shares appear pricey, at least on the surface level, at around 80.4 times trailing price to earnings (P/E). However, as the firm integrates AI into its learning management system (LMS) to take personalization and automation to the next level, I’d not dare bet against the name on the way down.
With a 1.37 beta, DCBO shares are likely to be a wilder ride than the TSX Index. Still, if you’re in it for the long run and like how Docebo is putting AI to work in the world of learning, the name seems worthy of one’s radar for September.
