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2 cheap stocks to buy if there is a market correction

Investors can still find cheap stocks even when the stockmarket is up and the S&P ASX All Ordinaries (ASX: ^XAO) is not too far off from its high. We look for good companies that either had a slip in business or are “taking a breather” on their way up.

Typically, May and the following months are known as a weak time for stocks. The financial news starts to have more worrying stories about market corrections and sell-offs. That puts fear into investors.

But not our Foolish readers. We know that there can be opportunities to pick up discounts up to 10%-15% sometimes just because of the season.

Here are two stocks that would be bargains in a sell-off.

Super Retail Group Ltd (ASX: SUL)

The specialty retailer that operates such stores as Supercheap Auto, BCF and Rebel Sports has had difficulties with earnings margins and like-for-like sales this financial year. This sent its share price down from $14 in November last year to a little over $9.

It has a reputation for strong earnings growth, which has been helped by recent acquisitions. While retail trade in general is starting to improve, the company is developing two new major distribution centres that will cut operating costs. In addition, a higher Aussie dollar keeps its purchase costs of imported goods lower for better margins.

Carsales.com Ltd (ASX: CRZ)

After recovering sharply from a February low of $8.69, the auto sales website stock has returned to about $10.50. In the last few months, it has announced investments in two auto sales website companies operating in South Korea and South East Asia.

This could add to its earnings and lead to further overseas expansion in highly populated regions with growing auto markets. In the first half, it had a 17% gain in net profit, continuing its high earnings growth track record since listing in 2009.

Another gem of an opportunity

Here is another stock that could beat these two and offer better returns. Top Motley Fool analysts just identified their #1 ASX pick for 2014, a small-cap stock that could be poised for big gains (and offers a fat, fully franked dividend!).

Discover all the details now, including the name and code, in this FREE investment report, "The Motley Fool's Top Stock for 2014."

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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