Value stocks

2 Value Stocks That Have Fallen at Bargain Prices by The Motley Fool

© Reuters. TFSA Investors: 2 Value Stocks That Have Fallen at Bargain Prices

Newbie TFSA investors should view bouts of market volatility as opportunities to stock up on stocks of fantastic companies that they intend to hold on to for the long term. Without a doubt, the great Warren Buffett has been busy in the first quarter of 2022 (he’ll likely be busy in the second quarter, given the worsening market sell-off), reaping the bargains from the market across the board.

The man’s insistence on very cheap stocks (many had single-digit price-to-earnings (P/E) multiples) is part of the reason for his long-term outperformance. Although Berkshire Hathaway (NYSE:) has risen in value, his discipline and ability to go against the grain during stressful and turbulent times make him an investment legend.

It’s time to go and do some good business on the market? Indeed, it is more a question of state of mind than intelligence when investing over long periods. By focusing on the bargains to be had rather than the losses you have accumulated, you will be in a better frame of mind and more likely to take advantage of opportunities.

As the famous saying goes, when there is blood in the streets, you have to act, even if some of the blood is your own!

This article will look at two value stocks that have become a bit cheaper in recent months. TFSA (tax-free savings account) investors looking for a bargain with their 2022 contribution may want to use it to play a second half that could see gains rather than accentuated losses.

Consider Dollarama (TSX:DOL) and Parkland Fuel (TSX:TSX:) – two retailers that could be poised to soar even if the markets don’t get in on the action.

Dollarama Dollarama is the popular chain of discount retailers that many Canadians know and love. Inflation weighed on Dollarama, prompting the company to raise its price cap to $5. Despite the price increases, Dollarama continues to be one of the main beneficiaries in this environment. How? Consumer spending has softened lately in response to the high level of inflation.

The recent talk of inflation isn’t helping the cause either. Therefore, many consumers are likely to shop from higher priced retailers to lower priced retailers like Dollarama. Even with price increases, the retailer continues to thrive. And when the recession hits (it may or may not), Dollarama will be far more resilient than most other retail players.

The $21 billion retailer is trading at an uncomfortable 33 times earnings. So there is a lot of optimism. While I’d rather wait for a steeper pullback (stocks are only down 5% from their peak), I’m not against buying a partial position here, as the P/E multiple may not tell the whole story, given the magnitude of multiple earnings squeeze that could be in the cards as the company seeks to make the most of increased consumer foot traffic.

Parkland Fuel For those looking for a cheaper game, Parkland Fuel is hard to pass up at these levels. Unlike Dollarama, which has been thriving lately, Parkland is stuck in a rut. Still down 22% from its 2020 highs, the fuel retailer endured a few challenges that made a quick recovery more difficult.

With a market capitalization of just under $6 billion, I see Parkland as an attractive takeover target. The company needs to invest to keep up with the times as the upcoming electric vehicle boom kicks it up a notch. With stocks trading at an absurd 0.2 times sales and 2.9 times book value, I think the risk/reward scenario is excellent as management looks to improve its margins.

The post TFSA Investors: 2 Value Stocks That Have Fallen at Bargain Prices appeared first on The Motley Fool Canada.

Foolish contributor Joey Frenette has positions in Berkshire Hathaway (B shares). The Motley Fool recommends Berkshire Hathaway (B shares).

This article first appeared on The Motley Fool