After the latest seasonal pullback, it seems wise to put your next $10,000 in a risk-free asset like a guaranteed investment certificate that promises north of 5%. Undoubtedly, the stock market can be a stomach-churner at times. But it’s a ride worth staying on if you’re looking to do better over the long haul. Indeed, you may feel too greedy, or even downright reckless, to buy stocks over risk-free assets, given where rates are today.
Still, I’d argue that for most investors, stocks are still the best wealth grower in town. Further, as the market pullback extends, the risks of said stocks stand to fall as the potential rewards increase. So, if you’ve got cash to put to work, a market correction certainly strikes me as more of an opportunity than a thing to bite your nails over!
In this piece, we’ll check out two stocks I’d be willing to consider as the market ends an otherwise decent year on a bit of a sour note.
Royal Bank of Canada
Royal Bank of Canada (TSX:RY) is one Canadian stock you can comfortably lean on whenever the tides get rough. The stock has made it through recessions before, only to finish higher a few years after. After a more than 20% drop from its highs, it certainly seems like a recession is a given.
In any case, Royal Bank stock is one of the better picks of the banking batch as headwinds unique to the industry begin to intensify. Loan loss provisions and all the sort can act as a drag. But at the end of the day, bank stocks are bountiful dividend payers. Royal sports a 4.54% dividend yield, which is worth grabbing as shares continue to slump.
At 11.3 times trailing price to earnings, I view RY stock as modestly undervalued, even considering the slate of banking risks ahead.
Spin Master (TSX:TOY) is a Canadian toymaker that has made a name for itself in the global toy market. Over the years, the firm has grown its portfolio through smart acquisitions. Through most of the year, the stock has been dragging its feet in the $30–38 range.
Right now, shares go for a modest 17.7 times trailing price to earnings. Though the $3.4 billion discretionary firm could sink if the holiday season fails to deliver. I’m inclined to believe that expectations are too light.
The company has improved the state of its inventory, and with six new Toy of the Year (TOTY) nominations, Spin Master stock could be a major mover as the firm looks to make the most of the best time of the year!
The Foolish bottom line
Royal Bank and Spin Master are two intriguing value plays that I’d be willing to pursue after recent weakness. At this juncture, I’m a bigger fan of Spin Master as it looks to top what I believe are muted estimates going into the final quarter of the year. Further, I think many are discounting the potential for the firm’s new toys to thrive, even in today’s challenged toy industry.