The longer your investment horizon, the more the odds are in your favour. Undoubtedly, it’s tempting to get into a stock with the intention of selling it in a month or two. Isn’t that what investing is all about: buying low and selling high?
While I’m sure many new investors will find success by taking profits off of some of the hotter names in their TFSA or RRSP portfolios, I still think that the “letting your winners win” strategy might be the one that helps truly long-term investors really take advantage of the power to be had in long-term compounding.
When you add a TFSA into the equation, that’s tax-free compounding, a powerful concept that new investors must know about!
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Things are moving fast, uncertainties are high, but there’s still value out there!
Either way, though, the key is to get the snowball rolling and hang on for the ride, provided your estimate of intrinsic value is still above the market’s going price. In any case, it’s hard to think beyond three to five years these days. With AI technologies rapidly changing the world, it’s tough to predict what the second half of the year holds.
But just because the future is less certain does not mean you should hoard cash and wait for a big drop. At the end of the day, inflation remains high, especially in the U.S., where the CPI number came in at a red-hot 4.2% last month. While Canada has a bit less inflation to deal with, you wouldn’t know it by shopping at the local grocery store. Food inflation is, in my opinion, way too high, perhaps higher enough to justify a rate hike or two.
Whether the Bank of Canada looks to hover its hand over the rate-hike button, though, remains the big question. They seem reluctant, even with new inflationary threats on the horizon, such as higher energy prices.
Leon’s Furniture
As for a deep value dividend player, I’d look to monitor the radar in this environment. I think Leon’s Furniture (TSX: LNF), a mid-cap with a $1.7 billion market cap, looks like a dirt-cheap gem that many value investors have overlooked. Sure, it’s not a tech and AI play that will rocket in the face of the AI revolution. But it is a firm that stands to benefit from a recovery in discretionary spend, especially as young Canadians, like Millennials, start getting serious about homeownership.
The stock currently trades at 10.8 times trailing price-to-earnings (P/E), a very reasonable price to pay, even if a technical recession weighs on Canada’s economy in the second half of the year. With shares already in a bear market and a dividend yield that could soon rise above 4% again, I’d not sleep on the exceptionally well-run name, especially as we enter a tougher period for consumers.
Indeed, discretionary budgets could find themselves between a rock and a hard place as inflation weighs and employment softens. In any case, lower rates and falling oil (reopening of the Strait of Hormuz hopes) might just pave the way for a second half that’s less horrid than feared. Add the efforts to boost the e-commerce business into the equation, and it’s hard not to like the name, given its market dominance in furnishings.
