Yesterday’s 3.8% plunge in the TSX Composite brought back memories of the June 2020 COVID-19 market crash. As global markets reel from the United States’s announcement of widespread “retaliatory” tariffs and China’s subsequent 34% counter-tariffs, fear has gripped investors across the board. But as Warren Buffett famously said, the time to “be greedy” is precisely “when others are fearful.”
For long-term-focused Canadian investors, this market turbulence presents a rare opportunity to acquire quality assets at discounted prices. While many fled from richly valued growth stocks like Shopify (which tumbled 20% in Thursday’s trading session), the current climate may be ideal for value investing—a strategy centred on identifying companies trading below their intrinsic worth.
Why value stocks shine during market turbulence
Value stocks typically offer a margin of safety during volatile periods because they’re already priced conservatively relative to their fundamentals. When market panic creates significant gaps between price and actual value, patient investors can position themselves for substantial long-term returns by buying undervalued stocks.
While defensive plays like Loblaw Companies stock gained 2.5% during yesterday’s selloff, its forward price-to-earnings (P/E) ratio of 20.5 suggests it’s already fully valued. Instead, true bargains may be found elsewhere in the Canadian stock market, particularly in sectors with proven resilience through economic cycles.
Bank of Nova Scotia: A value stock opportunity in Canadian banking
Bank of Nova Scotia (TSX:BNS), or Scotiabank, one of Canada’s “Big Five” chartered banks with over $1.4 trillion in assets, stands out as a compelling value stock to buy in April’s uncertain trading climate. Canadian banks have demonstrated remarkable stability through numerous economic downturns, and Scotiabank is currently trading at attractive valuations that suggest significant upside potential.
With a forward P/E ratio of just 8.6, BNS stock offers a compelling entry point for value-conscious investors. The bank’s ongoing strategic pivot from Central American markets toward the vibrant U.S. banking sector through its latest minority stake in KeyCorp represents a significant shift that could enhance earnings stability and drive future revenue and profit growth.
Despite a temporary earnings dip during the first quarter (Q1 2025) following divestitures in Colombia and other Central American operations, Scotiabank maintains a robust capital position with a common equity tier-one (CET1) ratio of 12.9 — comfortably above regulatory requirements. This strong capitalization provides the bank with ample flexibility to weather economic storms while continuing to underwrite new business.
Perhaps most attractive to long-term investors is Scotiabank stock’s generous 6.2% dividend yield right now. Through dividend reinvestment alone, investors could potentially double their money in under 12 years, according to the Rule of 72, and that’s before accounting for any capital appreciation.
Capital gains are most likely to materialize as the bank remains sustainably profitable.
BNS Revenue (TTM) data by YCharts
Retained profits grow the banking stock’s book value. With a three-decade track record of sustained profitability through multiple recessions, BNS offers the kind of reliable compounding that builds significant wealth over time.
The future looks brighter than today’s headlines
While market anxiety over global trade tensions is understandable, it’s essential to maintain a long-term investing perspective. Market downturns are usually temporary, but the resilience of the Canadian economy, particularly its well-regulated banking system, has been proven repeatedly throughout history.
Dollar-cost averaging into value stocks during these market dips allows investors to accumulate quality assets at favourable prices. Additionally, there’s reason to believe the current tariff situation may prove temporary if governments eventually work toward more sustainable trade relationships.
For Canadian investors with a decade-long horizon, focusing on fundamentally sound businesses trading at reasonable valuations offers a time-tested path to wealth creation. The mathematical reality of compounding means that modest annual returns of 8-10%, when sustained over long periods, transform into substantial wealth in retirement.
The Foolish bottom line
Market volatility creates emotional challenges and financial opportunities. By focusing on quality Canadian value stocks like Bank of Nova Scotia that combine strong fundamentals, attractive valuations, and reliable dividends, investors can position themselves for long-term success regardless of short-term market noise.
Remember that building wealth isn’t about timing market swings perfectly — it’s about consistently investing in quality businesses at reasonable prices and allowing time to work its compounding magic.
