Despite the recent wobbles in the TSX Index on tariff fears, Canadians should still be more than willing to put an extra $1,000 to work on the bargains that come their way. Of course, even cheap TSX stocks stand to get a bit cheaper or even much cheaper if a Canadian recession is in the cards for the spring or summer. Undoubtedly, tariffs could have the potential to really rock the economy.
And while tariffs could be reduced or even eliminated in a more optimistic scenario come April, I wouldn’t place too large of a bet on the battered “falling knives” that have the most to lose from a trade war. Instead, incremental buying, with a modest sum such as $1,000, could make sense over the coming months. Indeed, the most volatile movers could have the most room to the upside once things normalize and we go from tariff threats to focusing on profound economic drivers such as generative artificial intelligence.
Without further ado, let’s check in on one Canadian stock that looks like a fantastic buy after the TSX Index’s latest stumble of around 5%.
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Magna International
Magna International (TSX: MG) looks like a battered bargain that may be worth backing up the truck on. Though shares rallied close to 7% on news that auto tariffs will be given a one-month exemption, there’s still no guarantee that such tariffs will be lowered or cut come April. Indeed, it’s nice to be optimistic with auto-part makers like Magna. But if 25% tariffs come online and last through the year, a name like Magna could really take a beating. Though I view shares as extremely cheap at 10.4 times trailing price to earnings (P/E), I’d rather wait to see how things play out.
Perhaps a plunge back to $50 or so would make for a nice entry point. At the time of writing, the dividend yield stands at a towering 5.7%. Should the yield pass the 6% mark, perhaps over escalating tariff fears, perhaps putting $500 to $1,000 could make sense. Of course, there’s a lot of risk with the name, depending on what kind of tariff the auto plays will be for. If you seek a great business that stands to benefit from the longer-term secular trend towards the electrification of vehicles, Magna still stands out as a great pick.
For now, though, it’s all about tariffs and less about the secular drivers that have pulled the brakes of late. Do get ready for quite a choppy ride as tariff talks pick up going into next month. The stock boasts a 1.64 beta, implying more volatility than the TSX Index.
Given the auto industry’s tough spot in a potential trade war, I’d argue that investors should brace for even more volatility than the high beta suggests. Indeed, MG stock may move more like a stock with a beta closer to three as the next chapters of trade spats move on.
The bottom line
Magna stock looks dirt cheap and oversold. For incremental dip buyers, I think averaging down on further weakness could be a smart game plan, provided you seek deep value and are willing to hold for 10 years or more.
