Thank God we have maintained a diversified portfolio. Although we feel a bit queasy to see our growth stock holdings fall a lot recently, it’s nothing we’ll lose our sleep over. Besides, my stable dividend stocks have been resilient with some that have appreciated recently! That stability has helped keep us calm despite the growth stock volatility.
Here’s a comparison. Shopify (TSX:SHOP)(NYSE:SHOP) stock has fallen about 20% from its all-time high in about 2.5 months and ConvergeTechnologies (TSX:CTS) has declined about 26% in about 5 weeks.
While the main stock we’ll talk about in this article, Merck (NYSE:MRK), has popped about 15% in roughly 2 weeks. First, we’ll go over why we started a position in the dividend stock. Second, we’ll discuss why it recently popped.
A couple of weeks ago, I wrote that “as the U.S. dollar has weakened against the Canadian dollar, it could be an opportune time for Canadians to buy U.S. stocks and for Americans to stick with U.S. stocks instead of buying Canadian stocks.”
Since then, as shown in the chart below, the USD has recovered slightly.
Notably, the USD is still a way off from its five-year midpoint of approximately C$1.30. Moreover, the WTI oil price is at a high point of +US$71 per barrel, which could weaken from there. Therefore, Canadian and U.S. investors alike are probably better off continuing to invest new money in U.S. stocks trading at good valuations.
Much like two weeks ago, I still find value in Bristol-Myers Squibb (NYSE:BMY). Merck (NYSE:MRK) that’s in the same space is also similarly undervalued. The dividend stocks offer decent yields of about 3%.
The stock market is trading near its all-time high. Morningstar revealed that of the 682 U.S. stocks that its equity analysts cover, “only 5(!) have 5 stars, while 83 receive a single star.”
For those who are not familiar with Morningstar’s star system, 5 stars represent super undervalued while 1 star represents super overvalued.
The Volatility Index, the “Fear Gauge” or “Fear Index” is a 30-day forward-looking measure of the volatility of the market. The lower the VIX is at, the less fear or more complacent the market is and vice versa. The Volatility Index also suggests there’s little fear in the stock market right now.
Although Morningstar covers less than 20% of the stocks on the U.S. market, its coverage includes many prominent names across different industries.
Should investors stop buying stocks in a high market? As the stock market has ascended to new heights, it has become more difficult to find value, but they do exist if you look for it.