What a terrible start to September investors have had to endure. With the broad stock market on a bit of a losing streak, thanks in part to some concerning jobs data in the U.S., questions linger as to whether Canadian investors should be buyers of the most hard-hit stocks on the dip or if it’s a better idea to rotate your portfolio such that it’s better able to roll past any additional punches thrown your way.
Indeed, September was never a good month for stock gains. With such a scary start, it’s not hard to imagine why the bears could continue to outnumber the bulls.
So, as the market’s losses extend, here are three intriguing stocks that may just be able to roar higher once the bull market is ready to take centre stage once again.
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Constellation Software
Constellation Software (TSX: CSU) is one of those smart beta market beaters that makes sense to keep tabs on whenever the entire market heads south. Though I wouldn’t ready up for a recession, I think that a few economic stumbles could make things extra choppy as we close out the year. Obviously, election years are among the toughest to invest through, especially if you’re a new investor who’s just looking for stability and appreciation.
Constellation Software is a software company that’s been a less volatile ride compared to most other double-digit growers in the tech sector. Arguably, the odd tech-focused correction or bear market is a major plus for Constellation as it allows the firm to put its cash to work on intriguing opportunities in the space.
Undoubtedly, it’s not hard to imagine many small tech startups are feeling the wobbles in this rough, high-rate world. And as the tides come in, perhaps Constellation can get more bang for every buck it seeks to invest.
If you’re looking for smaller-cap tech exposure, Constellation is a fantastic way to do it. Management knows small-cap software like few others in the country. And after slipping just over 6% from its recent high, I’d not be afraid to start nibbling the name on the way down.
With a 0.81 beta, the $89 billion software juggernaut faces less market risk than your average holding. At 31.35 times forward price to earnings (P/E), CSU stock screams growth at a reasonable price, even if the TSX Index is on the brink of correction. Constellation is far too good of a company to pass up whenever there’s such a seasonal sale on stocks!
Spin Master
Spin Master (TSX: TOY) makes for a choppier ride, with its 1.87 beta entailing much more market risk than average. Still, with the stock stuck in a multi-year hangover, down more than 35% in the past two years and close to 49% from all-time highs not seen since the summer of 2018, I view Spin as a deep-value stock for investors looking for outsized gains come the next bull market.
Indeed, Spin Master is a toymaker that has diversified digitally in recent years. And though consumer-facing headwinds have prevailed of late, I like the setup going into the new year.
The stock’s cheap at 9.8 times forward P/E, and with such a strong portfolio of brands, I think it’s just a matter of time before TOY shares can roar back. The economy still looks robust, and as rates come down, Canadians should start spending again on a wide range of discretionary goods, such as toys. Though the holiday season could be muted, I’d not be afraid to pick up a few shares of TOY below $30 per share.
