Market fluctuations are part and parcel of investing. No investment is secure. Even bank deposits and bonds are subject to banks’ credit risk. Physical gold and cash are subject to theft. Despite this, the stock markets bear the brunt of being volatile. This is because most investors come to the stock market to make quick returns and end up investing in risky stocks at their peaks.
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Market fluctuations: Risk or Opportunity
One often learns the rules of investing after burning cash. As you invest in stocks, you realize that market fluctuations are an opportunity to buy the dip and sell the rally.
Like a sailor sets the sail as per the direction of the wind, a curious investor understands the flow of the wind by studying the macro environment, policy changes, changing trends, and setting their buy or sell mode in relevant stocks by understanding the business and company fundamentals.
These fluctuations push your investment to sail ahead and drive returns.
How to use Canadian stocks to benefit from market fluctuations
The Canadian stock market has some good dividend and growth champions that have aced the formula of sustainable growth.
Descartes Systems (TSX: DSG) is a growth champion that has given consistent 20% average annual returns to shareholders. Market fluctuations have pulled down its stock price by 16.8% in the last two months. Driving these fluctuations are Trump’s tariffs on Canadian imports and Canada’s retaliation.
Descartes Systems stock
Descartes Systems offers supply chain management solutions, and oil and gas exporters are one of its key clients. The tariffs could stall trade for a few months as importers and exporters work out ways to adjust their business to these changes and negotiate trade terms. This uncertainty could drive demand for Descartes Global Trade Intelligence and Customs and Regulatory Compliance.
This period of uncertainty is only short-term because companies will find an alternative to thrive in the changing environment. Descartes zero debt and $236.1 million cash as of December 2024 give it the flexibility to thrive amidst uncertainty. When there is certainty around tariffs, trade momentum will pick up.
If the 2018 trade war is taken as the base, Descartes stock fell 21% in the second half when tariffs kicked in. Those who bought the dip gained from the 50% recovery rally in the first half of 2019. Since the 2018 dip, the stock has surged 305% after accounting for the latest dip. The company’s strong business model and fundamentals make it a stock to buy in a volatile market.
Fiera Capital
While Descartes is a growth champion, Fiera Capital (TSX: FSZ) is a growth and dividend champion. It can give you handsome returns in the short term and strong dividends in the long term, depending on what you seek.
From the business perspective, Fiera is an asset management company that collects money from enterprises and individuals and invests in Canadian and U.S. public equities, fixed income, real estate, and private markets. Since 68% of its assets under management (AUM) are from Canada, its share price moves in tandem with the TSX market fluctuations.
For the fundamentals, its revenue is relatively secure as the key revenue stream is the base management fee, which is a percentage of AUM. The company gives dividends based on the free cash flow earned from this revenue.
Fiera Capital’s stock price has dipped 37% since December 2024 as the market turned bearish amid policy uncertainty. This uncertainty did not impact its free cash flow or the dividend payments, increasing its yield to 14%. It is an opportune time for long-term investors to lock in such a high yield. Its 15-year history of paying regular dividends shows the resilience of the management to pay dividends.
Even short-term investors could buy the dip as Fiera’s stock price is sensitive to market momentum. The stock price surged 85% and 44% in the last two recovery rallies
- from October 27, 2023, to March 8, 2024, driven by a pause in interest rate hikes.
- From June 15, 2024, to November 2, 2024, driven by accelerated interest rate cuts.
The stock could have continued to surge if it weren’t for the Trump tariff uncertainty.
