In this piece, we’ll check in on the 52-week low list to see if there’s any value to be had after shares have taken a fairly hard hit to the chin. As always, just because a stock has shed a huge chunk of its value doesn’t mean there’s any value to be had, even if the negative momentum begins to show signs of slowing. Undoubtedly, value traps can really sink a portfolio, especially for the dip-buyers who are on the hunt for the cigar butt types of stocks that might have one last puff for dirt-cheap multiples.
While I’m not the biggest fan of chasing the cheapest-looking stocks possible since shares might be cheap for very good reasons, limiting the value to be had by buying on the dip, I think that some merchandise in the 52-week low “bargain bin” may still be worth snatching up, especially for investors who understand the fundamentals, turnaround story, and can spot the opportunity to snag shares at a nice discount to their true worth (or intrinsic value).
Indeed, it’s no easy task to determine what’s a real value and what’s discounted for a reason. In this piece, we’ll check in on two names that I think warrant investor attention as market volatility increases to cap off what’s been a rather good year, especially for the TSX Index, which should have what it takes to stay ahead of the S&P 500 and certainly the Nasdaq 100 as this tech-driven sell-off looks to extend itself.
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Telus
Telus (TSX: T) stock has been interesting with shares now back in the teens after a vicious slide that took it to fresh 52-week (and multi-year) lows. The stock is now off a grand total of 44% from its all-time high.
Shares still don’t appear to be a steal at 24.3 times trailing price to earnings (P/E). Though I don’t view the 8.34%-yielding dividend as heading for an imminent cut, I would be cautious if you’re hanging on with the expectation that the dividend will stay intact over the next five years.
Though I believe in management’s ability to pull off a turnaround even amid historic, profound challenges, I view the dividend as becoming quite a heavy commitment for a firm that has a considerable amount of capital expenditures. It’d be easier if the dividend were reduced, but I do think Telus can maintain a balance that keeps dividend investors happy as the tides eventually turn.
As more investors criticize the payout as potentially too good to be true or unlikely to keep on growing, shares might get caught between a rock and a hard place.
Either way, I think there’s real value in the shares, regardless of the dividend’s fate (I think it has a good chance of surviving). On the plus side, interest rates could keep falling from here, lowering Telus’s borrowing costs as it continues to expand its network. And with so much pain already priced in after a few tough quarters, I think there’s room for a bounce, since the earnings bar has been lowered enough, in my opinion.
Add the recent cybersecurity service, which aims to protect against quantum threats, to the equation, and I think Telus is well-equipped to do well as emerging technologies arise. With satellite connectivity, AI data centres, and quantum emerging, Telus seems to be aware and ready to expand its footprint.
In short, Telus stock looks like more of a buy than a sell, but beware of volatility!
