With markets flirting with all-time highs each day, it’s become quite difficult to spot great value, especially for our friends south of the border. Although the markets are becoming frothy, there are still exciting businesses that are trading at substantial discounts to their intrinsic values. Here are two cheap stocks you may want to buy for the week of Cyber Monday.
Gildan is a generic manufacturer of commoditized articles of clothing like t-shirts, fleeces, and hoodies. While investing in the hottest fashion trends may seem more enticing, you really can’t beat the boring, predictable nature of off-brand generic clothing. These are everyday essentials that never go out of fashion, and, best of all, the design work (which could eat up R&D expenses) is left to the purchasers of Gildan’s products.
A majority of Gildan’s revenues are from outside Canada, so the recent dip in the loonie is a clear positive for the generic clothing manufacturer. If you believe the loonie is heading south from here, Gildan is probably a terrific buy today. The stock trades at an 18.7 price-to-earnings multiple, much lower than the company’s five-year historical average multiple of 24.8, and it has traded flat for over two years now.
I think that’s a cheap price to pay for a simple, predictable business that has rewarded investors with dividend hikes on a consistent basis since it was initiated a few years ago.
Aritzia isn’t the greatest retailer to own for the long term, but after falling ~40% from all-time highs, I think it makes a lot of sense to consider for bottom fishers looking for a dirt-cheap stock.
The company is on the cutting edge of fashion, but, unfortunately, a large amount of the designs could see their fate in the bargain bin, since specialty fashion can go from a hit to a miss over a relatively short span.
In addition, Aritzia’s customer service has been lacklustre, and the company has really struggled to offer its customers good bang for their buck, even for the less popular items on its discount rack. The tough retail environment certainly isn’t helping Aritzia, but I do think the company’s exclusive brands will keep it above water, at least over the medium term.
I’d never recommend owning Aritzia for the long haul, but those who are interested in a compelling trade may find that shares have been oversold and could be due for a bounce. Given the nature of Aritzia’s business, it’s not surprising to see the company resort to excessive discounting this Black Friday. With many items over 50% off, it wouldn’t be a surprise to see sales pop for the upcoming quarter, as the company looks to offload some of its inventory.