It’s a rather uneasy time to be an RRSP investor, with rate hikes ongoing in the U.S. to combat the wave of inflation that’s impacted everyone’s purchasing power. Indeed, the tech sector has taken the brunt of the damage amid more than a year of rapid-fire rate increases. For RRSP investors looking to put new money to work, waiting it out seems like the best course of action.
Why not just wait for Chairman Powell to pull the brakes or signal cuts before getting in?
By doing so, one risks missing out on the greatest gains to be had as broader markets look to ride on the back of the next bull. Indeed, new investors will discover quite quickly that moves made to avoid the downside can lead to missing out on the greatest recovery gains.
As firms navigate through mounting macro headwinds, the only thing that seems to be guaranteed is volatility.
Overweighting your RRSP or TFSA in cash amid high inflation isn’t as safe as it sounds!
The tug of war between bulls and bears is showing no signs of letting up. Even if market strategists at top banks expect a vicious double-digit percentage pullback, I still think it’s a wise idea to drip-feed any excess RRSP or TFSA cash into stocks on your radar that scream value.
At the end of the day, red-hot inflation will continue to penalize savers reluctant to get into “risky” securities. In this piece, we’ll look at two intriguing plays that may be worth taking a chance on if you’ve got a long-term horizon and stomach for wild market swings.
In this piece, we’ll look at two stocks I’d still be willing to buy, even with all the headwinds poised to slam this market. Consider Constellation Software (TSX:CSU) and TFI International (TSX:TFII).
Constellation Software
Constellation Software is a high-growth tech stock that’s outperformed the broader basket over the past year. Over this period, shares are up around 10% and are within striking distance of a new high. How has the diversified software behemoth been able to steer clear of the damage caused by surging rates? Constellation has brilliant managers running the show. They know how to drive profits over time and have a history of making value-creative deals.
Now that valuations have contracted in the tech scene, Constellation has the means to get more for less with its investment dollar. At 73.3 times trailing price-to-earnings (P/E), Constellation still commands a very lofty multiple. But it’s one that’s worth paying, given the calibre of management and the stock’s rich history of steady gains through all sorts of economic climates.
TFI International
For RRSP investors looking for value over prudent growth, TFI International seems like a worthy option for consideration. Like Constellation, the transportation and logistics leader has been a major TSX beater over the past decade. It has been a much bumpier ride for shares of the LTL (less than load) trucking firm. If you had held and added to your position on dips, though, your TFI investment would have been even more fruitful.
TFI stock is at a fresh new high after rallying since the midpoint of last year. Still, the stock looks cheap at 14.1 times trailing P/E. If you can deal with the choppier moves (1.5 beta, which implies more volatility than the market), I view TFI as a very worthy addition to any RRSP or TFSA focused on long-term growth.
