Stock market investing during a volatile market is nothing short of an emotional rollercoaster. Many newer investors find uncertain market conditions unnerving and avoid putting money into work in the stock market to avoid potential losses. Savvier investors look at uncertainty as an opportunity to buy high-quality stocks at better price points.
Seasoned investors have a long-term view when they invest in the stock market. Downturns present them with opportunities to invest in high-quality stocks at a bargain and reap the benefits of capital gains during the recovery. The key to successfully implementing such a strategy is identifying the difference between stocks that decline to reasonable levels and undervalued stocks.
Today, I will discuss two TSX stocks trading below 52-week high levels that might be worth investing in for this purpose.
Alimentation Couche-Tard
Alimentation Couche-Tard Inc. (TSX: ATD) is a $66.7 billion market-cap convenience store giant, operating a network of stores across Canada, the US, Ireland, Scandinavia, and several other international markets. The company also operates stores under the Circle K banner in even more international markets, further diversifying its revenue streams. Its revenue primarily comes through merchandise and services, road transportation fuel, and other products.
Providing essential goods and services like food and fuel, Alimentation is a stable business that generates strong cash flows. It is also capable of funding massive acquisitions using its cash flows. Currently, ATD is in the process of acquiring 7-11, one of its biggest competitors. The move could see the company dominate the sector.
As of this writing, ATD stock trades for $70.38 per share. Down by 17.7% from its 52-week high, it might be an excellent bargain for your self-directed portfolio.
Open Text
Open Text Corp. (TSX: OTEX) is a TSX tech stock boasting a $9.4 billion market capitalization. The Waterloo-headquartered company is a leader in enterprise information management solutions. It provides services that are essential for businesses that want to manage and secure data efficiently. The company offers a wide range of solutions to help businesses achieve that, including content and cloud management, artificial intelligence (AI)-powered analytics, and cybersecurity.
The ongoing macroeconomic challenges and broader market volatility have affected the stock, leading to the pullback in share prices. The company is also undergoing adjustments from the divestiture of its application modernization and connectivity business. Despite the decline in sales, the company posted an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 37.6% in its latest quarter.
As of this writing, OTEX stock trades for $35.46 per share. Down by 28.9% from its 52-week high, it might be a good bargain to consider for your portfolio at current levels.
Foolish takeaway
“Buying the dip” can be an exciting way to use some of your money to grow your wealth by investing in the stock market. However, you must remember that stock market investing is inherently risky. Stock prices often decline during market downturns for valid reasons. To successfully buy the dip, you must carefully examine whether any company-specific issues might be the reason for the decline or if the downturn reflects temporary issues due to market fluctuations.
Investors with a long-term strategy know how to use market downturns to their advantage. History has shown markets recover and eventually grow to greater heights. Investors with the patience and discipline to invest in high-quality stocks and keep their money in the market have seen the market cycles reward them with greater wealth.
Given this backdrop, Alimentation Couche-Tard stock and Open Text stock can be excellent long-term holdings to consider for your portfolio.
