Global stock markets incurred substantial losses during the second half of 2018. While last year’s troubles were not nearly as bad as the financial crash of 2008, nobody knows what the future holds. If the market crashes again, you will need to be ready before it happens. Let’s look at three stocks you can add to your portfolio that can help you in case of a market crash.
Clairvest Group (TSX:CVG) is an equity management firm based in Toronto. Over the years, the company has invested over $1 billion of capital in over 40 companies. CVG is headed by a team of experienced investment managers that choose the companies in which to invest based on certain criteria. This responsibility cannot be taken lightly; CVG’s profitability hinges on the company’s ability to choose the right companies.
CVG’s portfolio is very diversified. The firm has invested in companies within many different industries and sectors, including consumer services, manufacturing, retail, and healthcare. Over the years, CVG has proven its ability to make shrewd investment choices. The company’s financial results have been stable, and CVG’s stock weathered the financial crash of 2008 in exemplary fashion. Last year’s troubles on the stock market also did not affect CVG as much as it did most other companies.
One of CVG’s strength is its operating efficiency, which is in part a feature of the industry. Over the past five years, the company has averaged an excellent 55% net profit margin. That means the company keeps more than half of its revenues as net earnings, on average. CVG’s net income has also doubled over the past four years. The company has a beta of 0.66, which indicates its stock has low volatility. If the company’s net income keeps increasing, CVG could remain an excellent option for when the market goes down.
Brookfield Infrastructure Partners
Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) owns and manages physical assets, mostly in the infrastructure space (as the name of the company suggests). The company operates in five main segments: utilities, transport, energy, data infrastructure, and corporate. BIP’s owns assets all over the world, with only about 25% of its cash flow being generated in North America. The company’s operations extend to Europe, Asia, and South America.
Because BIP’s revenue is tied to physical assets, the company’s financial performance is generally stable regardless of economic conditions. The utility segment is the single biggest revenue source for the Toronto-based company. BIP generates upward of 40% of its funds from operations from its utility’s assets. This revenue often comes from long-term contracts and are therefore guaranteed even in a bear market or a recession. BIP can provide diversification benefits for your portfolio.
Last year, Metro (TSX:MRU) provided a return of more than 19%. This figure far outperforms the average return for the TSX, which was a net loss of about 10%. The company had its ups and downs, but MRU is well adapted to perform relatively well in a bear market. Indeed, the company currently has a beta of 0.05, which is a very low figure.
There are hundreds of stores under many brands within the MRU umbrella. The company is one of the largest food retailers in Canada and also provides pharmacy services. The blend of products and service MRU offers coupled with the company’s geographical diversification (MRU owns operations in Europe, Africa, Asia, and elsewhere) means MRU’s earnings are unlikely to incur substantial financial losses due to an economic downturn.
MRU’s revenue and profits have been steadily increasing over the years. Since 2015, the company’s net income increased by more than 230%. MRU’s net profit margin also grew by 188% over the same period. These upward trends are a good sign. Along with MRU’s size, business model, and extremely low beta, investors looking for a shelter from bear markets can count on the Montreal-based retailer.
The bottom line
It is always better to be safe than sorry. Clairvest Group, Brookfield, and Metro are three companies that can help you be safe next time the market crashes.
Just one ticking time bomb in your portfolio can set you back months – or years – when it comes to achieving your financial goals. There’s almost nothing worse than watching your hard-earned nest egg dwindle!
That’s why The Motley Fool Canada’s analyst team has put together this FREE investor brief, including the names and tickers of 3 TSX stocks they believe are set to LOSE you money.
Stock #1 is a household name – a one-time TSX blue chip that too many investors have left sitting idly in their accounts, hoping the company’s prospects will improve (especially after one more government bailout).
Still, our analysts rate this company a firm SELL.
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Fool contributor Prosper Bakiny has no position in the companies mentioned. Brookfield Infrastructure Partners is a recommendation of Stock Advisor Canada.