Canadian Stocks to Buy During a Recession
Diversification is one of the most important investment rules and one that continues to confuse investors. We often hear about picking multiple stocks from different parts of the economy. By adding one or more recession-proof stocks to your portfolio and adding diversification, you can benefit from the next downturn.
In May 2018, I discussed three recession-resistant stocks to consider in the event of a downturn. Whether you believe in the latter or the former, you will want to buy recession-proof stocks just in case.
The three recession-resistant stocks that I thought would do well in a downturn were those from the recessions of 2001 and 2008. Instead, these three shares have appreciated by 68%, 4%, 11% and 33%, respectively, over the months.
In the current bear market, these stocks have gained 7%. In early March, before the coronavirus decimated stocks, investors drove up these companies “share prices because of their natural resilience to recession. O’Reilly holds his own and has earned his place as a stock that can be invested in even during a recession.
The lucrative quarterly dividend yield of 7.16% makes it one of the highest paying assets on the market. However, be wary of chasing companies based on dividend yields, as some companies will try to attract investors with high dividends to distract from their poor underlying health.
Recession-proof stocks are classified as stocks of companies that continue to thrive during economic downturns, such as the current stock market pandemic. Certain industries, such as consumer goods, food and beverages, are considered recession-resistant because they have been identified as indispensable raw materials. The three stocks listed above are diversified pick-ups that offer investors growth and earnings potential.
As the world grapples with one of the worst health crises in human history, global stock markets have rebounded in the past year. Canadian stock markets, especially gold and technology stocks, have soared on COVID and are enjoying excellent returns, even though the broader TSX index has fallen nearly 2 percent this year. Recession-proof stocks are more likely to endure difficult economic circumstances, emerge victorious from the crisis, and grow out of their own situations, such as lockouts.
Stock markets are expected to remain volatile in the short term due to significant macroeconomic challenges at the global level. Although few analysts believe that markets in 2021 will undergo a correction, it makes sense to be prepared for such a scenario.
As mentioned above, it is important to remember that recessions are different for stocks than for everyone else. Some companies and sectors are immune to recessions, while others are better off in periods of upheaval. Stocks in sectors that are in a recession are not necessarily in the economy from which they can recover.
Invest in recession-proof stocks that have proven to perform sustainably during market setbacks, helping you hedge your portfolio and maximize returns. The spectre of an impending recession may tempt you to forget high-volatility stocks such as penny stocks. Instead, start looking for recession-proof (or at least recession-resistant) investments to reduce your portfolio risk and emerge stronger from the storm.
Safe assets such as gold are known to gain momentum in recessions and major economic downturns as people switch from risky stocks to high-quality metals. Companies that are best placed to survive in this environment, if not thrive, are defensive stocks that provide products and services that people cannot live without.
With Apple’s 5G iPhone coming soon, it seems silly to talk about recession-resistant stocks. But the top 20 stocks to invest in during a recession are valuable to investors and consumers intense times. These are not just great stocks to hold until the US economy and the global economy normalizes.
There is no question that reliable Canadian companies and recession-proof Canadian stocks are critical to any investment portfolio. There is not much the market can do to ignore them. When the economy weakens, you want to own shares in quality companies because they have the best chance of keeping their share prices during a market correction.
If you do not hold Canadian safe and reliable stocks that many people who buy new shares do not have in their portfolios, you will face more volatility than you are used to. Nonetheless, we found it useful to introduce two recession-proof Canadian stocks, one that you can put aside, forget and focus on earning more than any other part of your portfolio. One of the strongest reasons for believing that what is happening now is since many of the stocks controlled by Canadian public companies are also among the best recession-proof stocks.
The integrity of many of these companies is likely comparable to investing in junk bonds during a market crash, provided they survive. For example, Barrick Gold Corporation is one of the most popular companies in the world with an outstanding financial balance sheet. As a result, barriers sales increased 29.62% yearly, and EBITDA increased 49.03% year on year.
Despite a gross profit margin of 41.11% and a return on equity (ROE) of 11.75%, Barrick Gold Corporation is one of the most profitable gold stocks on the Toronto Stock Exchange.
Quarterly corporate profits increased by 60.9% yearly, exceeding the quarterly top growth rate of 14.1%. However, PepsiCo shares held their ground with average annual growth of 6% between 2008 and 2010.
For those who care about dividends, PepsiCo has increased its annual dividend distribution from $1.35 in 2007 to $2.86 in 2010, increasing nearly 40%. In addition, church & Dwight improved its earnings per share from 2007 to 2009 due to pricing for consumer goods when that figure was not yet reached.
Once we understand who the dominant companies are in terms of size and market share, we can put forward a recession-proof thesis. As we enter a recession, current CEO Jeff Harmening is optimistic about his chances.