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.
Savaria (TSX: SIS)
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.
