It’s yet another brutal September that’s going to be in the books. Next week is a fresh slate and a new month for investors. And though it can feel uneasy buying stocks right now, investors should consider the slightly better risk/reward scenario to be had on the broader basket of Canadian stocks.
In this piece, we’ll narrow in on two blue-chip darlings that have gotten that much cheaper over the past month. E-commerce tech titan Shopify (TSX:SHOP) and banking behemoth Royal Bank of Canada (TSX:RY) are down more than 3% and 20%, respectively, for the month of September. Whether October brings some relief, though, is another question entirely.
Either way, the September swoon has brought better entry points for young investors who are looking to beat the broader markets over a long-term timespan. Though the last quarter of the year may not bring forth much, if any, relief to stocks that were battered in recent weeks, the next five to 10 years seem brighter for the following firms that will find a way to move forward amid ongoing rate-related woes.
Source: Getty Images
Shopify
Shopify is in bear market mode again, with shares off 20% from 52-week highs of nearly $91 per share. Despite the recent dive, shares are still up over 47% year to date. This recent pullback, though painful for investors, isn’t out of the ordinary. Arguably, it’s a good thing that could give latecomers an opportunity to add to a position before the company can experience another leg higher.
Undoubtedly, the past year has seen major shifts in strategic strategy. Logistics is out; artificial intelligence (AI) is in. As Shopify incorporates new tech (think generative AI and other innovations) to add to the platform’s already wide moat, the stock look could be difficult to keep below $80 per share once the economic recovery finally begins.
With the company’s new AI assistant standing by merchants, the possibilities are endless as merchants look to treat a downturn as an opportunity to improve and prepare for the next market upcycle. In many ways, Shopify can find ways to win in this wobbly market, as it has the means to take more share in one of the largest total addressable markets out there.
Don’t let recent negative momentum trick you; Shopify is still innovating like it’s nobody else’s business. So, don’t bet against Chief Executive Officer Tobias Lutke as he prepares to steer the firm through the last bout of rough waters.
Royal Bank of Canada
Royal Bank of Canada is a bank stock that’s a safe buy whenever sentiment gets grim. Though no bank is immune to the pains of an economic recession, I find Royal Bank stock to keep improving itself as recession storm clouds approach.
More than a month ago, Royal Bank got the green light to takeover HSBC Canada in a deal worth $13.5 billion in cash. The move seems well timed and could help give Royal Bank a nice jump to its steps once Canada is ready to take economic growth into overdrive again.
With a powerful domestic banking business and a profoundly strong capital ratio, it’ll take more than just a storm to erode Royal Bank’s moat. My takeaway? Don’t let the recent 20% slump off highs pass you by! Royal Bank is still a best-in-breed bank in good times, bad times, and everything in between.
Better buy: Shopify stock or Royal Bank?
It really depends on your personal risk tolerance. If you’re a young millennial with more than 15 years to invest, Shopify stands out as a better buy right here. However, if you’re less than three years away from retirement, seek a handsome dividend, or are rattled by September’s choppy moves, Royal Bank seems like a wise choice at below $120 per share.
