Spring Sale
The sales are all around us! If you can stomach a little short-term pain, there’s a ton of long-term gain to be had. So, without further ado, let’s take a closer look at two “door crasher” stocks that Mr. Market has served up this Boxing Day.
Canada Goose Holdings (TSX:GOOS)(NYSE:GOOS)
Canada Goose is back to where it was two blowout earnings reports ago.
How does a stock that’s served up two massive quarterly beats not sustain a higher rally? A market crash, like the one we’re in the middle of right now, is primarily the reason why the Goose has struggled to fly high over the last few months.
If the markets weren’t in a state of shock, Canada Goose stock would likely be trading at over $100, nearly double the price of where it’s at right now. CEO Dani Reiss has been pulling out all the stops. Despite this, investors don’t seem to care, as they just want to rid their portfolios of growth names, as they hide from the bear that’s recently awoke from his hibernation.
To make matters worse, the recent arrest of Huawei executive and “construction delays” to the Goose’s China flagship store has some investors thinking that the company is pulling the breaks on its ambitious Chinese expansion, a move that would have served as rocket fuel for the company’s top-line and its stock which had been ripping since its IPO.
Now, as an extremely high growth name, the Goose is in the crosshairs of Mr. Market, and as the crash worsens, the pains for Canada Goose will mount, so don’t back up the truck on shares just yet. Nibble away on the dip, and keep adding to your position on the way down. Inevitably, the earnings results will begin to dictate the trajectory of stocks again, and when they do, you’re going to want Canada Goose back in your growth portfolio.
Spin Master (TSX:TOY)
Here’s another stock that investors love to hate, and for no real good reason!
The stock tumbled 40% from peak to trough over the last few months on no real negative news. The last earnings report had dents in the armour due to the Toys “R” Us bankruptcy in the U.S. market, and while there hasn’t been much negativity since, the stock had continued to tumble as if something was seriously wrong with the company, which there isn’t.
Spin Master is capable of double-digit earnings growth, with major catalysts in 2019 that could propel the stock back to new highs. With an ambitious international growth spurt underway, the world is Spin Master’s oyster. Moreover, with the recent DC Comics toy deal in the bag, I don’t expect the “sale” on shares of Spin Master will last long. The stock trades at 14 times forward earnings, which makes no sense given the growth potential, the sky-high 29% ROEs, and the period of seasonal strength on the horizon.
The company is likely performing very well with its holiday sales, and although the recent market turmoil will undoubtedly effect the sale of discretionary goods, toys aren’t like “adult” discretionary items, they’re still sought-after in economic slowdowns because kids don’t care about parent’s excuses about the current state of the economy, they need to have the latest Hatchimal or Paw Patrol toy, and there’s no way around that!
Just have a look at how Hasbro faired in the last recession and you’ll see toys are an outlier discretionary item that won’t see its sales fall off a cliff as quickly as most other cyclical goods. Spin Master is a strong buy right here because like Canada Goose, the name will eventually correct upwards once the dust settles and earnings matter once again, as they should.
Stay hungry. Stay Foolish.
