This week's market turbulence can be pinned on waning confidence in U.S. President Donald Trump's tax-cutting and infrastructure-spending agenda, but some of the best emerging buying opportunities have nothing to do with Mr. Trump.
Even after Wednesday's harrowing decline, the S&P 500 was less than 2 per cent below its recent record high, which isn't exactly bargain territory. Thursday's rebound shrank that discount.
Canada's S&P/TSX composite index has been hit harder, and is now nearly 4 per cent below its high point. But with a lofty price-to-earnings ratio of 21, the recent dip hardly looks like a reason to back up the truck.
In contrast, these three ideas stand out.
General Electric Co.
- Recent performance: down 13.3 per cent year-to-date
- Yield: 3.5 per cent
GE is a giant industrial conglomerate, but it's not dull. In the past decade, it has shed its financing arm and appliance division and doubled down on industrial equipment such as turbines and engines – making it a good investment for anyone who wants to bet on infrastructure.
But, clearly, the market isn't impressed: GE shares have been slumping, and the company's first-quarter results released last month hastened the trend.
Why? Its cash flow fell far more than anyone had been expecting, raising concerns about the company's quarterly dividend and its ability to invest in its operations.
These concerns are now priced-in, leaving an opportunity for a solid rebound should GE shake off these fears. And why wouldn't it? The company has been in the midst of a remarkable transition, giving it plenty of levers to pull as it cuts costs and streamlines its operations.
GE slashed its dividend during the financial crisis. This is not the financial crisis: In the first quarter, orders rose 10 per cent, profit beat expectations and management reaffirmed its financial guidance for the rest of the year.
Hydro One Ltd.
- Recent performance: down close to 15 per cent since last summer
- Yield: 3.8 per cent
Ontario's government raised a lot of money through an initial public offering of Hydro One in 2015. It raised more when it sold another stake a year ago, and raised more again earlier this month when it sold yet another stake.
With all this selling, the number of shares swirling around the market has more than doubled since the IPO of the electricity transmitter and distributor. It's not surprising that the share price has declined.
But look at the low price as a gift: Hydro One is a stable business that gushes cash and dividends.
It is being led by some real pros who are determined to transform it from a bloated utility to one that is more responsive. Its chief executive officer is Mayo Schmidt, the former CEO of Viterra Inc. who did wonders in transforming the grain handler before it was sold to Glencore International in 2012.
What's this about the Ontario government slashing hydro rates by 25 per cent this summer? Shareholders have nothing to fear: The government is pulling this off by refinancing debt and eliminating provincial sales tax on electricity sales. Hydro One has confirmed that the plan will have no impact on its net revenues.
Guaranteed Investment Certificates (GICs)
- Recent performance: yields are rising
Even the bravest stock market adventurer needs bullet-proof investments that will provide some stability and a modest income – and GICs have been looking tempting since Home Capital fell on hard times last month.
The alternative mortgage lender experienced a nasty run on its deposits, forcing it to respond with more attractive rates on GICs. Now, you can buy a five-year GIC from Oaken Financial – that's an arm of Home Capital – that will yield 2.85 per cent.
That's 1.6 percentage points better than a five-year GIC from Canadian Imperial Bank of Commerce, according to RateHub.ca, a financial product comparison website. The one-year GIC is also attractive, yielding 2.35 per cent or 1.5 percentage points better than most of the big banks.
Are these GICs safe, given Home Capital's enormous challenges? Your first $100,000 is fully backed by the Canadian Deposit Insurance Corp. So, yes, within that limit, they are.
Disclosure: The author owns shares of Hydro One.
For a guide to the best-paying GIC and savings accounts at alternative lenders, click here.
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