With the broad markets in recovery mode, long-term investors may wish to pick away at the wreckage with any extra cash they’ve been meaning to put to work but haven’t been able to either due to fear or a lack of stomach for the magnitude of volatility we’ve witnessed of late. Though there’s no guarantee that things will calm down for the summer season, as investors hold onto hopes for more deals and less extreme tariffs after the 90-day pause expires, I still think picking up some of the lower-beta defensives can make sense.
So, whether you’re looking to put $7,000 to work or an amount far less, the following names may make sense to start buying today as the TSX Index looks to push forward with its impressive bounce-back. After gaining a solid 2.5% in the past week, perhaps the “buy Canadian” sentiment could translate to better results in what’s shaping up to be a risk-on year for stocks.
In any case, here are two oversold stocks with swollen yields that could be overdue for a bounce going into the uncertain summer months.
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Restaurant Brands International
Restaurant Brands International (TSX: QSR) is one of my favourite quick-serve restaurant plays to pick up while it’s going for a very modest 19.8 times trailing price to earnings (P/E). That’s far too low a price to pay for four powerful fast-food brands (Burger King, Popeye’s Louisiana Kitchen, Tim Hortons, and Firehouse Subs), especially in an environment where pundits see a high risk of recession.
Indeed, the fast-food firms that can deliver value and convenience will likely be less impacted by a mild downturn at the hands of tariffs. If anything, revenues could continue marching higher in such a scenario as hungry consumers trade down from fancier dine-in options. In any case, if Restaurant Brands isn’t fully recession-proof, it certainly could be far more recession-resilient than most other firms.
As Restaurant Brands braces for the reveal of what could be some tough first-quarter (Q1) results, I’d look to be a net buyer on any weakness. Indeed, Q1 is sure to be weighed down by prominent headwinds, many of which may not be fully reflected in shares. At $87 and change, with a yield just north of 4%, I’d keep watch of the name if it moves into its early May quarterly reveal. Perhaps the headwind-plagued quarter could be met with a reaction that’s negative enough to produce a more attractive entry point, perhaps at around $85 per share, a robust support level.
Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) stock has also been under pressure in the past few months, now down 15.3% from 52-week highs and just shy of 20% from all-time highs. Indeed, tariff fears and the impact on the world economy could take away from Bank of Nova Scotia’s multi-quarter comeback.
Either way, I view shares as a great deal at 13.9 times trailing P/E, with a 6.3% dividend yield. Indeed, the yield has to be the main attraction to the internationally-focused Canadian bank for investors looking to get paid to ride through summertime volatility. With a 1.04 beta, investors can expect about as much volatility as the broader TSX Index.
Looking ahead, the bank will be doing its best to turn the tide in its international business. If Trump backtracks on sweeping tariffs, perhaps BNS stock will be in for a more promising second half.
