Deep-value investing can be quite tricky, especially if you’re a new investor who’s just getting used to the turbulent market waters. Heck, it’s hard to be a deep-value investor, even if you’re a seasoned investor who’s seen more than a handful of market corrections and crashes!
Not only do you need to be right (in that a stock’s market price is far lower than your projection of its intrinsic value), but you need to be willing to ride a potential roller-coaster ride until Mr. Market has a chance to recognize that he’s unpriced a given stock.
Indeed, it can take many months, perhaps even quarters or years, before the market sees what you do in any given stock. And if you’re not willing to hang onto shares for at least a few years, you probably shouldn’t get into a name to begin with as a beginner investor.
If you’ve got the time horizon, the patience, and the ability to stick with your conviction in a stock, the following two plays, I believe, may be worthy of watching as we head into the spring months of 2024.
SmartCentres REIT
SmartCentres REIT (TSX:SRU.UN) is a well-run retail real estate investment trusts (REITs) with a mouth-watering distribution yield of 7.57% at the time of writing. Undoubtedly, shares have been on a wild, windy ride since crashing back in 2020 during the early pandemic days.
Though the shares have not yet recovered, I continue to view the REIT as one of the best of the pack. It’s a mall-centred REIT and one that’s host to numerous high-quality brick-and-mortar establishments, many of whom can continue to pay rent as Canada looks to test a potential recession over the coming months and quarters.
Sure, retail REITs may not be an attractive place to invest these days. In fact, it’s quite an unloved part of an already unloved asset class. As rates fall and Smart moves forward with its various diversifying projects, I can’t help but stay bullish, even as others look elsewhere. Smart is a smart buy, in my opinion, as the yield stays bountiful.
Algonquin Power & Utilities
It’s not hard to imagine that Algonquin Power & Utilities (TSX:AQN) broke many hearts when it decided to reduce its dividend amid profound pressures.
Today, the stock goes for just shy of $8 per share, with a $5.4 billion market cap. The once-cherished dividend-growth juggernaut is now in a major rut, with few technical signs that it’ll bounce back, at least not anytime soon. Though some may view the utility giant as dead money as it looks to transform itself and sell off some of its assets, I see potential deep value for those patient enough to give the firm the benefit of the doubt.
The stock is down, and it’s down big over the past three years. Since its 2021 peak, the stock has shed around 66% of its value. Dip-buyers have taken a hit thus far, but I still think cautious contrarians could have potential relief rally gains as the firm does its best to right the sails. Will it be able to in 2024? I’m not sure. Regardless, I think it’s hard to argue that the risk/reward tradeoff is compelling, with shares close to multi-year lows.
