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With the S&P/TSX Composite Index down 4.1% over the past five days, many individual stocks have experienced even steeper declines. However, market volatility can present opportunities, especially for those with a long-term perspective.
Stocks Represent Ownership in Businesses
A stock represents ownership in a business. Sharp declines or increases in stock prices do not necessarily reflect a permanent change in the intrinsic value of the underlying business. For those who are patient, market downturns can provide a chance to acquire high-quality companies at attractive prices.
Market corrections are usually temporary. Historically, high-quality businesses tend to recover from declines relatively quickly. As Warren Buffett famously said, “Time is the friend of the wonderful company, the enemy of the mediocre.” For those who can afford to wait, the following two companies represent strong long-term opportunities.
A Top Canadian Blue-Chip Stock
Canadian Pacific Kansas City (TSX:CP) has seen its stock fall 6.5% in the past five days and 7.5% over the past six months. Such declines may present a favorable entry point for those with patience.
Founded in 1881, Canadian Pacific has demonstrated its ability to endure through the decades. Rail remains the most cost-effective method for transporting bulk commodities and goods across North America, ensuring the company’s continued relevance. The recent acquisition of Kansas City Southern’s transport network has expanded CPKC’s reach across Canada, the U.S., and Mexico. This expanded network positions the company to benefit from Mexico’s growing role as a manufacturing hub.
Canadian Pacific’s management team has consistently delivered strong revenue and earnings per share growth. Its emphasis on efficient rail operations has resulted in an industry-leading operating ratio. The company aims to double its earnings within the next four to five years, supported by a robust balance sheet that offers low-risk growth potential for shareholders.
A Pick for Value, Growth, and Income
Another stock to consider at a significant discount is Calian Group (TSX:CGY). The stock has decreased 5.5% this year and 14% over the past year.
Trading near its lowest valuation in five years, Calian Group is currently valued with a price-to-earnings ratio of 10. Despite this, the company anticipates a 30% increase in adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) for 2024.
Calian operates a diversified portfolio of businesses that serve various sectors, including government, institutions, and the private sector. The company has shown solid organic growth and has used acquisitions to diversify its revenue sources, enhance margins, and stabilize earnings.
After a minor earnings miss last year, Calian has been performing well. Despite this, the market has not yet fully recognized the company’s potential. For those who can look beyond short-term fluctuations, Calian presents a compelling opportunity for value, growth, and income, with a dividend yield of 2.1%.
