Just with one more trading week left in the first month of the new year, investors might be wondering what they should do with their latest $7,000 Tax-Free Savings Account (TFSA) contribution. Undoubtedly, there’s been a lot of nerves to start the year. But the name of the game remains investing for the long run, especially if you’re a beginner investor who’s just getting a feel of what it’s like to be invested.
Volatility is the price that needs to be paid to ride one of the best assets to grow one’s wealth over extended periods of time. If there were guarantees or anything else, the returns simply would not be all too great. And with interest rates moving lower, the key is taking smart risks that have rewards that make things worth the while.
While others maximize return potential with less regard for the risk side of the equation, smart value investors prioritize the risk/reward balance. In this piece, we’ll look at two great candidates that TFSA investors might wish to consider for their latest contribution. Perhaps $3,500 each could make sense for investors looking for something to buy before the month comes to a close.
Source: Getty Images
Aritzia
When it comes to hot stocks, Aritzia (TSX: ATZ) is a name that new investors might find very interesting. It’s a well-established retailer in Canada, but in the U.S., it’s somewhat lesser known. But that could change with time as the firm opens up new stores south of the border.
With expansion growth prospects that could continue to offset tariff headwinds, I’m inclined to label shares of Aritzia as a long-term growth staple. Of course, the stock is no stranger to the odd bear market. And one may have already started, with shares recently experiencing a correction of more than 13% from recent highs.
Though the correction takes lots of froth off the name, I still think there’s potential for shares to keep gravitating lower, at least until the firm has a chance to pull the curtain on another blowout quarter. As Aritzia gets the U.S. rollout right while investing in operating efficiencies as well as new concepts to beef up sales while driving foot traffic (think the A-OK Cafe attached to many Aritzia stores in the mall), I think ATZ shares might actually still be underpriced, even at a seemingly fully-valued 30.6 times forward (that’s forward, not trailing) price to earnings (P/E).
If you’re a fan of the retailer and think the U.S. expansion could prove disruptive, I’d stick with ATZ. It’s a premium growth stock, in my opinion.
Loblaw
Loblaw (TSX: L) stock has been less exciting in the past year, but it’s hard to argue against nearly 35% in past-year gains. It’s a steady performer with a fairly predictable earnings growth story. The major grocer is picking up traction and could continue to be a hot spot among Canadian consumers who continue to crave value and discounts, even as inflation stays calmer. Of course, the low-cost grocer stands out as the ultimate way to do well in all environments.
Recession or productivity boom, Loblaw stock looks like a winner as management looks to do what it can to keep its hot multi-year run intact. With so many growth levers and superb managers, I’d not give up on shares, even if they are a tad pricey at 30.7 times trailing P/E. The 0.88% dividend yield is quite low, but forgivable, given that the main attraction to L stock has to be the capital gains potential.
With over 307% gains in the past five years, Loblaw shows that you can make big money while playing defence. Though such returns are less likely in the next five, I still view the name as a wonderful portfolio diversifier that can continue to impress.
