Investing in the stock market when everybody else is seems like a logical choice. It can be a good way to capture gains due to the positive momentum. However, the more seasoned investors look for opportunities to invest when share prices are going down across the board. By identifying high-quality stocks trading at discounts, they can capture even greater upside once the market recovers.
After climbing as high as 22.4% from the start of the year, the S&P/TSX Composite Index has slightly pulled back in the last few weeks. As of this writing, the Canadian benchmark index is up by around 19% year to date. Some investors might be panicking, but savvier investors are busy looking for the next big investment.
Today, I will discuss a TSX growth stock that is down by around 5% from its 52-week high that you can buy today at a bargain.
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Dollarama
The term “growth stock” often makes investors think about tech stocks. However, several other sectors of the economy offer growth stocks. Dollarama (TSX:DOL) is a growth stock that has enjoyed substantial success over the years by offering value to consumers. Dollarama is a $50.22 billion market-cap giant in the Canadian retail sector.
It is the country’s largest value-priced retail chain, offering a diverse range of daily consumer products, seasonal items, and general merchandise. It has over 1,600 stores across the country and has expanded into several other countries through strategic acquisitions. Its latest acquisition was of The Reject Shop, which paved the way for its entry into the Australian market.
Dollarama is a dividend stock, paying investors $0.1058 per share each quarter, translating to a meagre 0.23% dividend yield. Where it lacks in terms of delivering high-yielding quarterly payouts, Dollarama stock makes up for it in capital gains. As of this writing, Dollarama stock trades for $181.71 per share. While it is down 5% from its 52-week high, the stock has delivered 21.63% in capital gains over the last 12 months.
Foolish takeaway
Dollarama benefits from every stage of the economic cycle. The products it offers are well-priced for when the economy is doing well. It also offers the best prices during downturns, when people are looking for ways to save costs. In each case, Dollarama can generate stable and resilient cash flows to fund its expansion and grow shareholder value.
The recent downturn is likely temporary. It might be a good time to invest in its shares before it starts climbing again.
