Canada markets close in 2 hours 13 minutes
  • S&P/TSX

    -165.46 (-0.82%)
  • S&P 500

    -53.43 (-1.25%)
  • DOW

    -250.98 (-0.74%)

    -0.0029 (-0.37%)

    +0.44 (+0.49%)

    -2,689.27 (-8.80%)
  • CMC Crypto 200

    -31.21 (-5.76%)

    -7.70 (-0.43%)
  • RUSSELL 2000

    -41.36 (-2.07%)
  • 10-Yr Bond

    +0.0980 (+3.40%)

    -269.20 (-2.08%)

    +1.01 (+5.16%)
  • FTSE

    +8.52 (+0.11%)
  • NIKKEI 225

    -11.77 (-0.04%)

    +0.0010 (+0.13%)

Stay Invested in a Recession: Increase Positions in 2 Value Stocks

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
edit Person using calculator next to charts and graphs
edit Person using calculator next to charts and graphs

Written by Christopher Liew, CFA at The Motley Fool Canada

Market declines are disconcerting, but it doesn’t mean you have to sell. A bear market is one of two cycles in the stock market, and a bull market usually precedes it. The TSX’s bull run from 2021 is over, and top-performing sectors last year, financials (-12.07%) and consumer staples (-2.46%), are underperforming year to date.

Today, headline inflation and a looming recession creates unease among investors. However, it’s also an excellent opportunity to increase positions in value stocks from each sector. Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Alimentation Couche-Tard (TSX:ATD) should hold up well against further volatility.

Durable rebound from a downturn

Canadian big banks, including CIBC, have proven their stability from economic headwinds. The fifth-largest bank has kept investors whole on dividend payments every year since 1868. As of this writing, the bank stock trades at $64.28 per share, or 11.92% lower from its year-end price on 2021. It could stage a durable rebound from a downturn.

However, the dividend yield of 5.08% is among the highest in the banking sector. The $58 billion lender raised its dividend by 3.1% after Q2 fiscal 2022 despite the 19% decline in net income versus Q1 fiscal 2022. CIBC’s loan-loss provision tripled quarter over quarter, while non-interest expense climbed 13% year over year.

Victor Dodig, CIBC’s CEO, said, “We delivered well-diversified growth across our bank in the second quarter as we continued to invest to execute our client-focused strategy and further build on our momentum. As we go forward, we’ll continue to take a purpose-led approach as we navigate the evolving operating environment.”

The net income of the Canadian Commercial Banking and Wealth Management business in Q2 fiscal 2022 increased 20% to $480 million versus Q2 fiscal 2021. Management expects this unit to deliver the fastest sales growth over the next three years (10-13% CAGR).

CIBC also targets a 7-10% compound annual revenue growth for its Canadian Personal & Business Banking and Capital Markets divisions through 2025. In the medium term, Dodig expects the bank’s revenue to increase at a faster pace than spending. He added, “The current pace of spending is more elevated than we would envision over the longer term.”

Top gun

Alimentation Couche-Tard is the top gun if you’re looking for a superb value stock in today’s complex environment. The $55.18 billion company revealed plans to revolutionize the convenience store industry with the deployment of over 10,000 touchless self-serve cash registers in more than 7,000 Couche-Tard and Circle K stores.

More importantly, the consumer staple received upgrades or buy recommendations from CICB Capital Markets and Wells Fargo. The former, through Equity Research Analyst Mark Petrie, expects Couche-Tard to deliver stronger-than-expected industry fuel margins in Q4 2022.

Analyst Anthony Bonadio, an analyst from Wells Fargo, is bullish on Couche-Tard’s ability to capitalize on M&As in the fragmented industry. It should also boast an attractive valuation and could be insulated from longer-term headwinds. At $53.28 per share (+0.7% year to date), the stock pays a modest but safe 0.82% dividend.

Value over growth

Market analysts suggest taking positions in large-cap stocks during periods of uncertainty. Furthermore, investors should lean more toward value stocks over growth investments.

The post Stay Invested in a Recession: Increase Positions in 2 Value Stocks appeared first on The Motley Fool Canada.

5 Free Passive Income Stock Picks for 2022

Looking for high-quality Canadian stocks that pay attractive dividends?

Our market beating* Stock Advisor Canada team has released a new report revealing five blue-chip Canadian stocks that pay handsome dividends, and we’re giving away this report for free for a limited time.

Get our favorite passive income stocks today, and learn more about all the perks Stock Advisor Canada provides our members!

Get Your Free Report * Returns as of 6/22/22

More reading

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard Inc.


Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting