If the recent wave of volatility has you feeling rattled, do know that it’s times like these when longer-term outperformers are made. Indeed, it’s not easy to even think about picking up shares that are on a bit of a losing streak, especially when all it takes is a few words from President Trump to sink the broad stock market again. Indeed, tariff threats are not to be taken lightly. However, excess pessimism isn’t always the right way to go, especially since everybody has already worried about how bad tariffs can get.
Perhaps it’s time for a bit of hope as Canada’s new prime minister, Marc Carney, looks to meet up with Trump to hit some sort of deal. Though there’s no way of knowing for sure, I think the odds of reaching a deal that doesn’t entail stiff tariffs are slightly higher. Of course, you shouldn’t invest when you think a resolution will be in store. Instead, think about investing for the next five to eight years, as it’s over these lengthy horizons that meaningful wealth tends to be made.
With drivers like the artificial intelligence (AI) boom kicking into high gear, perhaps investors are too occupied by tariff fears to see the potential positive forces that could lie further out down the line.
Indeed, it’s easy to miss the forest for the trees at a time like this. In any case, if you’ve yet to do some buying, especially with your latest TFSA (Tax-Free Savings Account) contribution, perhaps now is as good a time as any to look through the TSX Index for merchandise you wouldn’t mind buying at a discount, even if it means having to deal with some underperformance for another couple of weeks, months, or even quarters.
Here’s one fast-moving stock that I think is overdue and due for a bounce at some point. Furthermore, shares look incredibly cheap at current levels, so there may be a high chance of getting a nice margin of safety at current prices.
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Magna International
First up, we have Canadian auto-part maker Magna International (TSX:MG), which is a firm that stands to take a huge hit at the hands of outsized Trump tariffs, specifically on auto-related goods. Indeed, being an auto-part maker also leaves the stock vulnerable to outsized downside in the face of a recession. As autos roll lower, it’ll be tough for MG stock to gain any form of relief.
With a recession on the radars of some and worst-case scenario fears of tariffs already having worked their way into the share price, the big question is if MG stock is already trading at multiples that reflect the macro headwinds that could happen.
Personally, I think MG stock is a deep-value bargain at 10.2 times trailing price to earnings (P/E) after sinking 12% in three months. If tariffs are off and a recession can be avoided, I’d argue that there’s a considerable amount of multiple expansion that could be warranted. Either way, the 5.4% dividend yield is large enough to make the rougher ride worth staying aboard. Just be ready to buckle your seatbelt, given the high 1.64 beta, which entails a rough ride versus the rest of the market.
