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Having saved $5000 from your employment income, you are now considering investing it in stocks through your Tax-Free Savings Account (TFSA). The current market situation offers a variety of value stocks trading at deep discounts that you might consider buying in August.
Three stocks to buy in August
Famed value investor Peter Lynch had an investment philosophy that involved classifying stocks based on their growth pattern and investing in them accordingly. He outlined six categories: solid stocks, slow-growing stocks, fast-growing stocks, cyclical stocks, recovery stocks, and investment stocks. Below are three stocks that cover three of these categories. Together, they can offer a good mix of growth in various scenarios across different sectors.
Slate Grocery REIT
The real estate market suffered a massive correction over the past two years as central banks raised interest rates to a decade-high. This trend pushed down the unit price of several REITs as the fair market value of their property portfolio fell. In this sector-wide downturn, Slate Grocery REIT (TSX:SGR.UN) The unit price has fallen more than 27% since April 2022, when the rate hike began.
The real estate investment trust (REIT) is currently trading at 0.76 times its book value per share. Book value is the total value per unit after deducting assets from liabilities. The REIT is trading at $12, 76% of its book value per unit. It is an asset investment, as investors have undervalued the stock.
Slate Grocery REIT owns 72 retail store properties across the United States. The value of these properties will likely increase over the long term as the housing market recovers. Additionally, the REIT has room to increase its rent, as it charges lower rent than others in the market.
The unit price could see a recovery as market conditions improve. Since this is a REIT, buying on the dip can give you the advantage of earning a higher yield of 9.79%.
Beehive stock
Hive Digital Technologies (TSXV:HIVE) is a fast-growing stock, which is currently range bound due to market uncertainty. Its share price is derived from its Bitcoin inventory that it has mined over the years. Bitcoin prices are sensitive to the economic scenario. They tend to rise in a strong economy. Therefore, when the fears of recession Hive's share price, which soared in late July on weak US jobs data, has fallen nearly 36% in two weeks.
This fast-growing stock can bring you both short-term and long-term returns. The stock is comfortably around $4 on the lower range and can rise to $6-$8 on the upper range in hopes of an economic recovery. The short-term strategy is to buy the stock at $4 or less and sell it at $5.5 or more, making a 35-40% capital gain.
The long-term strategy is to keep buying Hive shares whenever they fall below $4. Since they are bought at the time of the dip, the risk of a downside is mitigated. When the economy recovers and the price of Bitcoin rises, we may see strong growth in the stock. The company is also expanding its revenue streams and is offering its data centers for high-performance computing. This segment is relatively small, but it is growing rapidly. It could help Hive generate stable cash flows in the long term.
Telus shares
Telus (TSX:T) is a slow-growing stock that can offer generous dividends and reduce downside risk during a market downturn. The telecom operator's share price was hit by high interest rates that pushed its leverage ratios beyond its target range. With a dividend payout ratio At 91%, well above its target range of 60-75%, the market has discounted the stock due to the risk of a dividend slowdown.
Now that the Bank of Canada has resorted to interest rate cuts, these ratios should improve and provide relief to Telus's struggling finances. Telus has also given up on price competition with rivals. AEC and has begun to raise prices. This move could lead to a recovery in profit margins.
While stocks will remain sensitive to interest rate decisions in the near term, they are a long-term value buy.