Sticking with the blue chips can be a fantastic way for beginning investors to learn the ropes in the investment world with companies they may already know a great deal about! Indeed, you should aim to invest only in what you know. This can save you from trouble once the hot momentum play begins to reverse course. Of course, you could miss out on a year’s biggest winners, but, at the very least, you won’t put yourself in a position that leads you to panic-sell on a loss because you forget the reason why you decided to get into shares of a firm to begin with.
Indeed, speculating or trading stocks of businesses you do not understand can take a hit on your portfolio. Over the long term, you should aim to minimize the chances of such devastating setbacks rather than seeking to maximize the upside with less considerable potential downside risks. Indeed, when we chase a hot momentum stock, some folks seldom think about what can go wrong.
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Trump tariff tensions could be a buying opportunity
In this piece, we’ll focus on tried and true blue-chip Canadian stocks that can help lead the TSX Index higher despite the recent threat of Trump tariffs. Indeed, it is remarkable that Canada’s market has been able to stand tall despite the threat of tariffs or a potential trade war. Either way, the following names seem to have a wide enough margin of safety to ride out a rocky February into a post-tariff-pause environment, one that hopefully will have no tariffs on the table between the U.S. and Canada or the U.S. and China.
Of course, if tariffs are unavoidable, investors should brace for a pullback of sorts, at least initially. Either way, long-term investors need not fret because the long-term narrative will be tough to derail, regardless of what happens in the coming month.
CP Rail (CPKC)
CP Rail (TSX: CP), or CPKC (Canadian Pacific Kansas City), is arguably one of the most exciting rail stocks in the continent. It’s surely priced as such, though, with shares trading at around 27.4 times trailing price to earnings (P/E) at the time of writing. With the stock crumbling nearly 6% in Monday’s trading session, perhaps investors will have a chance to do some bargain hunting. Indeed, Trump tariffs will make the railways a very choppy ride in February. But if negotiations between Canada and the U.S. are constructive over these 30 days, there’s room for optimism.
Either way, if Mr. Market gives you a chance to buy a wide-moat firm at a close to 6% markdown, you take it, regardless of what’s going on. While I wouldn’t dismiss the impact of tariffs, I find that hitting the panic button is never a good idea. With so much tariff tension baked into the rails, perhaps an agreement between Canada and the U.S. could cause the broad rail scene to bounce right back overnight.
CN Rail
CN Rail (TSX: CNR) is another railway that saw shares take a brutal hit to the chin on Monday. Despite the relative discount to CP stock, CNR shares imploded 5.3% in a day. Indeed, tariffs are not good news for the transportation giant. But investors shouldn’t get ahead of themselves, as the 25% tariffs on Canadian goods going into the U.S. (and retaliatory tariffs on U.S. goods coming into Canada) may not see the light of day after the February tariff pause concludes.
As such, I’d look to pick up high-quality stocks like CNR while other investors throw in the towel over an event that’s not yet certain. Sure, investors hate uncertainty, but if you can brave the choppiness, there’s a nice discount to be had on one of the best rails in the world. At 20.5 times trailing P/E, CNR looks like a blue-chip bargain to be bought with both hands. The 2.33% dividend yield is also to be appreciated!
