With a rather volatile beginning to this new year, investors seem to be wondering if it’s time to shift into lower-beta value stocks and some of those defensive dividend payers before that inevitable correction has a chance to wipe out 10% in value or more. Undoubtedly, market corrections are pretty unpleasant, especially if it’s been a long time since we’ve felt the pain of one.
Indeed, stocks seem overdue for a 10% drawdown, but whether the latest wave of volatility is the start of one will be the big question. Indeed, instead of timing corrections and the market, I’d rather focus on the longer-term opportunity in stocks. Undoubtedly, the latest pullback could be a great buying opportunity for the cash-hoarding investors out there as much as the beginning of something more ominous.
In any case, I don’t think a rotation out of growth (and tech) back to the traditional value names is worth putting too many of your chips on, especially since the generative artificial intelligence (AI) boom may have a bit more to offer in terms of productivity gains in the new year and beyond.
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Don’t time the markets when there are great tech bargains out there
Undoubtedly, 2025 is bound to be a big year for various tech firms as they look to AI as a meaningful growth driver of sorts. Whether the hype surrounding AI (is it lingering or waning?) can help postpone the next market correction remains to be seen.
Either way, I would not want to wait around uninvested with tons of cash sitting on the sidelines. Indeed, the wait for a 10% dip could be much longer. And let’s just say I would not be all too surprised if we went another year without having the TSX Index pull back by around 10%. Instead of waiting for those elusive dips (they could stay elusive in 2025), perhaps picking up shares of already cheap firms relative to their growth makes sense at a time like this.
Sure, you probably won’t get your desired price of admission, but at the very least, you’ll be able to buy on weakness if you take more of an incremental buying approach, one that takes timing out of the equation.
If a stock you buy today at close to 52-week highs just so happens to take a dive in the next week or month, you’ll be able to add to the position and not fret over your poor timing. Indeed, it’s really a great way to approach investing if you’re a beginner who’s been conditioned to buy low and sell high, or in the case of today’s tech-driven bullish market, buy higher and sell higher.
Shopify: Canada’s growth darling could heat up in 2025
One of the names I’d look for to heat up this year is e-commerce darling Shopify (TSX:SHOP), a firm that may just complete its comeback from a nasty 2021-21 crash that wiped out a vast majority of its value. Indeed, it seemed like Shopify stock was a bubble back in early 2022, when shares acted as a canary in the coal mine of sorts for the rest of the tech sector (and broad market) that went down for the entire year.
Nowadays, SHOP stock is back, and it could embrace the rise of agentic AI to accelerate its growth and comeback plans. At 66.9 times forward price to earnings, the stock doesn’t look cheap, but given the wind that could hit its back, I’d not be afraid to be a buyer of the 10% drop off recent 52-week highs. Just how high could SHOP fly in 2025? I think $200 per share is a realistic target—it also happens to be the Bay Street-high rating at the moment.
