Warren Buffett’s phrase, “Price is what you pay, value is what you get,” holds in today’s market. The current market scenario of a steep correction in the TSX, fears of a recession, and panic is the perfect time to spot value stocks. The price of some fundamentally strong stocks facing no direct impact from the tariffs also fell amidst fear, creating an opportunity to buy the dip.
Remember the Trump tariff on Canada in early February, followed by a 30-day pause, created a dip and rally in the stock market in just one week. The reciprocal tariffs in April, followed by a 90-day pause, are causing a resurgence of the momentum. However, the markets could continue to fall even during the pause, depending on how negotiations work out.
Instead of waiting for the nail-biting moment, you can use the market volatility to your advantage and fill up your portfolio with value stocks while they are still cheap.
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Two Canadian value stocks to buy
Trump has paused the retaliatory tariffs for 90 days, which has resulted in some recovery in several stocks after the steep fall.
Descartes Systems
Descartes Systems (TSX:DSG) stock rose 8% on the pause after a 10% dip. However, the stock is down 17% since the February tariff announcement. The company is significantly exposed to tariffs as it earns revenue from the transit of goods, services, information, and people. Its supply chain management solutions help smooth the trade.
The tariff war has affected its very operation of trade and logistics. Value investors don’t see what is happening in the present. Instead, they see the future growth potential and are investing in it today. Many market experts believe that the tariff war could bring a structural change in the global supply chain.
Constant updates in tariffs make Descartes’s Global Trade Intelligence solutions the need of the hour. Moreover, these tariff pauses could pull forward trade. Companies might stock up before trade is implemented, accelerating Descartes’s revenue growth in the second quarter.
If the tariff war is over, business could return to normal and drive Descartes’s stock to normalcy. If the tariff war is prolonged, a new trade order will kick in, and Descartes can help companies efficiently adapt to the new supply chain.
In either case, Descartes will stand to benefit, thanks to its diverse client base across verticals. Moreover, the company’s zero-debt balance sheet gives it financial flexibility to withstand periods of downturn.
Bombardier stock
Bombardier (TSX:BBD.B) stock quickly recovered from its April 2 dip after the 90-day pause. However, the stock could fall further on any such surprises. The key is to have the courage to buy at the dip. Remember, the tariffs could impact Bombardier in the short term but will not affect its long-term secular demand. In fact, tariffs could create an opportunity for Canada and other countries to buy defence planes from Bombardier to avoid the United States’ tariffs.
Bombardier CEO Eric Martel’s concerns eased when the White House clarified that goods under the United States-Mexico-Canada Agreement (USMCA) would be exempted from tariffs. Tariffs on steel and aluminum are not a major concern for Bombardier. In fact, its update on the production and testing of its next-generation Global 8000 aircraft confirms its supply chain is unaffected.
Moreover, Bombardier could prioritize orders for other countries if the tariff situation in the United States worsens. Under this scenario, the company’s cash flows would continue in the short term.
While the economic slowdown could slow aircraft orders, their aftermarket revenue could continue to grow as business jets in the skies need maintenance and repair. Moreover, the company has no debt maturity till 2026, giving it financial flexibility to withstand a downturn.
Investor takeaway
Growth stocks tend to have higher valuations as their sales and earnings are growing. Hence, buying the above stocks closer to their 52-week low can help you enjoy the recovery rally and their long-term growth.
The tariff-induced market volatility has created an opportunity to buy the dip. You can find some good value stocks by following the stock updates.
