If you happen to be in the market for stocks that will do well during a potential recession, the following two tickers should give you some shelter. With one strong perennial TSX-listed retailer and one key Canadian healthcare pick, the following duo of recession-ready stocks represent good places to hide if the global economic outlook takes a turn for the worse.
However, one of them is a stronger buy than the other. So, if you’re expecting the domestic market to start experiencing a little extra turbulence in the year ahead, but you still want to keep buying stocks, let’s buckle up and break out the calculators.
This is a key stock to buy now if you’re expecting a full-on market downturn. It’s not just one of the best healthcare stocks on the TSX index; it’s also a great place to hide if the economy heads south. Personal mobility solutions are Savaria’s bread and butter, and with a vast geographical area served, it has you covered in terms of spatial diversification, too.
Looking for a solid track record? Savaria’s one-year past earnings growth of 44.9% exceeds the industry average of 23.8%, as well as even its own impressive five-year average of 31.5%. This trend is set to continue, with a 34.4% expected annual growth in earnings being more than enough to get the growth stock crowd excited.
Though its PEG of 0.8 times growth is suitably low, with a P/E of 26.4 times and a P/B of three times, Savaria isn’t what some eagle-eyed value investors would call cheap. Go ahead and stack Savaria stocks if a dividend yield of 3.2% looks good to you, however. A 20% discount against future cash flow value might sway the forward-looking investor on this one.
If you like upside, it’s interesting to see the share price up 3.97% in the last five days, showing that Savaria’s movement is in keeping with a broader New Year’s rally in the TSX index — indeed, its beta of 0.97 indicates near-market-level volatility.
Loblaw Companies (TSX:L)
Normally one of the best retail stocks on the TSX index, Loblaw Companies’s one-year past earnings unfortunately fell by 67.1%, while the Canadian consumer retailing industry grew by 33.1% in the same 12 months — a bit of a change from a five-year average of 31%, and one that doesn’t play nicely with a high debt level of 124% of net worth.
The rest of the data is rather mixed: though its beta of 0.43 indicates less than half the volatility of the market, and its share price is discounted by 33% compared to its future cash flow value, it’s not a good value stock, with a P/E of 42.1 times and P/B of 1.8 times.
This poor valuation makes for a fairly low dividend yield of 1.94%, while a contraction by 5.6% in expected earnings counts this stock out for growth investors. In terms of momentum, it’s barely budged in the last five days, having gained only 0.33%, while the rest of the market seems to continue its rally.
The bottom line
There is some wisdom in the perception that healthcare and groceries are recession-proof; after all, the vagaries of the economy have no effect on basic human needs. However, of the two downturn-friendly stocks detailed above, only one is a strong buy at the moment based on the data alone, and that has to be Savaria.
The financial world is buzzing as Iain Butler and his team of market-beating analysts in Stock Advisor Canada pick their favorite stocks for 2019 and beyond.
As a special gift for investors, they’ve decided to give away one of their top TSX stock picks of 2019 for FREE.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. Savaria is a recommendation of Hidden Gems Canada.