Although it can seem significant at the time, market corrections aren’t rare. They happen more often than most people realize. Although each one comes with its own set of challenges, the best investors are always prepared for them, even if it’s impossible to predict exactly when or why they’ll happen.
Right now, that potential catalyst is a growing trade war. With tariffs already impacting supply chains and more uncertainty brewing, investors need to have a plan. Because while you can’t control the headlines or how the market reacts in the short term, you can control how you respond.
That’s why the best strategy is to stay focused on the long term, keep some cash on the sidelines, and look for stocks that either won’t be impacted much by the turmoil or are trading far cheaper than they should be based on the actual impact on their business.
Even if you didn’t prepare in advance, it’s not too late. Your decisions in the moment matter just as much.
How can investors prepare for market corrections?
The first and most important thing you’ll want to do in this environment, or anytime the market may sell off in the future, is avoid panic selling.
It’s completely natural to feel concerned when markets are under pressure, but selling in the middle of a downturn often means locking in losses. By reacting emotionally, you risk exiting at the worst possible time when stock prices have already fallen.
It’s also essential to understand the short-term headwinds and how they are affecting certain stocks and the economy as a whole. That way, you can ensure you look for stocks that aren’t being impacted significantly.
However, understanding how the economy is being impacted also allows you to better understand the longer-term opportunity. Just like every correction before, this one will eventually pass, too.
While it’s normal for market corrections to feel unsettling, these are the types of environments that offer the best buying opportunities. They are the opportunities that savvy long-term investors wait months or even years for.
A lot of stocks can get dragged down purely due to sentiment. And when a company’s long-term potential remains intact, that kind of short-term selloff is a significant opportunity.
So, if you’ve got cash on the sidelines and are looking to take advantage of the current uncertain and highly volatile stock market, here are two high-quality stocks trading well off their highs.
Two top growth stocks to buy in the trade war sell-off
There have been several stocks that have declined significantly over the past few months, but two of the very best are goeasy (TSX:GSY) and Aritzia (TSX:ATZ).
Both goeasy and Aritzia are two of the highest-quality growth stocks on the TSX, so the fact that they trade so cheaply today is a huge opportunity.
goeasy, for example, increased its normalized earnings per share (EPS) from just $5.17 in 2019 to $16.71 in 2024, a compound annual growth rate of 26.4% over the last half-decade.
Furthermore, analysts estimate another 16% increase in its normalized EPS this year and another roughly 18% increase in its normalized EPS next year.
Therefore, while it trades off its highs and at a forward price-to-earnings (P/E) ratio of just eight times, it’s certainly one of the best stocks to buy now. For comparison, its average forward P/E ratio over the last five years is 10.5 times. So, investors have the opportunity to buy one of the best growth stocks on the TSX today while it’s significantly undervalued.
Meanwhile, Aritzia is even cheaper, trading roughly 34% off its 52-week high. And right now, Aritzia is trading at just 19.7 times its estimated earnings next year. That’s far lower than its average forward P/E ratio of 27.5 times over the last five years.
Therefore, when stocks sell off significantly during market corrections, it often creates the perfect window for long-term investors to buy high-quality businesses at a steep discount.
