The stock market can be a rollercoaster ride, and while it’s tempting to sit on the sidelines during periods of market volatility, dips often present the best opportunities for savvy investors. After a strong rally in 2024, the market had already experienced a correction of over 6% from peak to trough in early 2025. For investors with cash waiting for the right moment, dips could be the ideal time to put money to work.
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Why hold cash?
It might seem counterintuitive, but holding cash during periods of strong market rallies isn’t a bad strategy — especially when fund managers and investors start seeing the market as overvalued. When stocks are expensive and there’s an increasing probability of a market correction, some fund managers may hold as much as 30% of their portfolios in cash. The reason? Cash is king during a dip, allowing investors to buy high-quality stocks at more attractive valuations.
Take, for example, Warren Buffett’s Berkshire Hathaway. As of the third quarter of 2024, the company had a record US$325 billion in cash and cash equivalents — about 28% of its asset value. This war chest positions Buffett to seize opportunities during downturns.
If you’ve been holding cash and are ready to take advantage of this market correction, consider adding positions in undervalued stocks that show strong long-term potential.
Savaria: A growing play in the mobility sector
One company that’s currently trading at an attractive valuation is Savaria (TSX: SIS). As a small-cap stock, Savaria often experiences higher volatility, but that volatility can present an opportunity for higher growth. After a correction of around 30% from its 52-week high, Savaria’s market cap sits at around $1.2 billion, with shares priced at approximately $16 each.
The analyst consensus price target suggests this price point represents a discount of 32%. The company also offers a dividend yield of 3.4%. Savaria’s payout ratio is estimated to be sustainable at about 50% of its earnings this year. With analysts projecting an impressive 48% upside from its current price, Savaria is an intriguing growth play in the mobility sector.
Savaria specializes in accessibility solutions, such as elevators and stairlifts, and is well-positioned to benefit from the global aging population and increasing demand for “aging-in-place” products. With a diversified portfolio and strong growth prospects, Savaria provides both exposure to the healthcare and mobility sectors, making it an appealing choice for long-term investors.
Bank of Nova Scotia: A safe bet for income seekers
For those looking for a more stable, blue-chip investment, Bank of Nova Scotia (TSX: BNS) is an excellent option. Trading at around $68 per share, the bank has corrected about 15% from its 52-week high, presenting a buying opportunity.
Scotiabank’s long-standing history of reliable dividend payments makes it a safe bet for investors seeking stability. Currently offering a generous dividend yield of 6.2%, Scotiabank provides an attractive mix of income and long-term capital gain potential. With a reasonable price-to-earnings (P/E) ratio of just 10.2, it’s trading at a discount compared to historical averages, offering a good entry point for those looking to build a long-term portfolio.
The Foolish investor takeaway: Time to buy on the dip
If you have cash sitting on the sidelines, now may be the perfect time to put it to work. Stocks like Savaria and Bank of Nova Scotia — each offering unique growth or income potential — are currently priced attractively. By gradually investing in these stocks during the dip, you can take advantage of their potential upside while building a diversified portfolio for the long term.
