With another year at the doorstep, investors must once again take the time to re-balance their portfolios and select the very best investments for the upcoming year. Defensive investments are those that deliver consistent revenues, earnings, and dividends throughout all phases of an economic cycle, whereas cyclical companies are those that will experience substantial increases to the bottom-line profits as the economy improves.
In the Canadian market, the best defensive name to hold for the oncoming year is none other than Enbridge Inc. (TSX: ENB)(NYSE: ENB), which, at $50 per share, offers investors a dividend yield of more than 5.25% in addition to the potential for capital appreciation. The beauty of this defensive name is that the dividend yield is more than safe, as the company provides a service to customers that is absolutely essential. No matter the economic conditions, consumers and businesses need electricity.
On the cyclical side, shares of AutoCanada Inc. (TSX: ACQ) are primed to have an outstanding 2018, as the company has a substantial portion of its operations focused on Alberta. After close to three years of low oil prices and a provincial recession, the company is now like a loaded spring ready to explode. Given that the most recent quarterly earnings were on an uptick, investors may be starting to return to a name that was previously a high flyer that fell out of favour.
In spite of wanting to keep and fix an old car (rather than buy a new one), consumers will eventually recognize the economics of buying a new car. Sometimes buying new is cheaper than fixing an older vehicle. At a price of $23 per share, the breakout is only beginning.
In the U.S. market, the top cyclical name is none other than Walt Disney Co (NYSE: DIS), which takes in significantly more visitors during expansionary economic periods of the cycle. After close to a decade since the Great Recession, shares of this company, which makes dreams come true, may just be getting ready to rock higher. What makes this investment even more attractive is the recent acquisition of numerous assets from Fox, which will make the combination of assets even more valuable over the long term. With businesses that complement each other, investors should be handsomely rewarded.
On the defensive side, shares of Apple Inc. (NASDAQ:APPL) are fast becoming the most defensive company on the market, as the smartphones and apps available on the platform are becoming essential to many consumers. Newsrooms were previously dominated by the holiday sales of Apple, which has barely been mentioned during the current year (and even last year). The result is that the market is taking into consideration the additional Christmas sales as a nice bump, but they’re no longer essential to the long-term success (or survival) of the company.
