If you’ve got around $5,000 or more that you’ve been meaning to buy stocks with, searching for value on the TSX Index going into June isn’t the worst idea. Of course, it would have been nice to get back in April when fear and panic were the main emotions on Bay Street. Still, I think there are plenty of underrated and underappreciated stocks that can continue to have a good run as we turn the page in the first half of the year.
Of course, it may seem smarter to stash away the $5,000 in a guaranteed investment certificate (GIC) locked in for the next three years, where it can accumulate around 3.5% in interest annually. The TSX Index may seem a bit at risk at these new heights, especially if a recession proves unavoidable.
Tariffs are still a major risk that shouldn’t be discounted by investors. But that doesn’t mean it’s time to hide out in cash, especially since inflation could begin to become a problem again. Although the latest CPI numbers came in cooler, food inflation remains an issue. And until food inflation comes back down to earth, it’s unwise to dismiss the wealth-eroding effect of inflation.
So, while the 1.7% inflation rate in April may seem like things are back to normal, I’d encourage investors to pay a bit more attention to the 3.8% food inflation figure, which could easily worsen in the second half as tariffs weigh and the Bank of Canada looks to cut interest rates further. In any case, the fight against inflation continues, and stocks, I believe, are a great way to prepare your defences. Here is one name that I’d add to my shopping list for the rest of 2025.
Loblaw
Loblaw (TSX:L) may be a “boring” grocery company behind such stores as Superstore and No Frills. But the returns in the stock have been anything but dull, with shares nearly doubling (up 94%) in the past two years. If you held shares of L over the past decade, you’d be sitting on a lofty return of more than 350%.
And while such a glorious gain seems less likely in the next 10 years, I think that Loblaw looks unstoppable in the face of more macro headwinds, inflation, and the threat of rising unemployment. In a prior piece, I praised the company for moving ahead with its No Name store expansion. With food inflation flirting with 4% in the month of April, demand for lower-end discount retailers could have the potential to rocket even higher. And Loblaw is stepping up in a big-time way to meet such a demand boom.
Though I’m in no rush to buy shares at over 32 times trailing price to earnings (P/E), which is a fair (maybe undervalued if you’re a believer in Loblaw’s store expansion plan) price to pay, I think loading up the shopping cart on the next pullback could prove a smart strategy. Perhaps the $190-200 range could serve as a great entry point for new investors with extra cash to invest.
Finally, the 1% dividend yield, which is poised to grow rapidly, is the cherry on top.
