With news of a yield curve inversion stoking fears of a recession south of the border, and discontent with Brexit machinations rattling an already uncertain Eurozone, it seems that fear in the markets is set to be a permanent feature of 2019’s investment landscape. Indeed, with some analysts even suggesting a full-on bear market may be around the corner, it could be time to look at some big-name defensive stocks.
Banking and energy remain solid defensive plays
Anyone looking to insider confidence as a sign of a strong buy should note that more shares have been bought than shed by Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) insiders over the last three-month period, while inside buying has been fairly consistent over the past year. With a clean balance sheet but a low tolerance for bad debts, Scotiabank isn’t much different from most of the other Big Six bankers.
However, buying shares in Scotiabank could increase an investment by 32.76% over five years, and while that isn’t the kind of percentage that would leave a high-growth investor salivating, as a defensive play, it could add growth as well as backbone to a portfolio.
With an attractive P/E ratio of 10.6 times earnings and a tasty dividend yield of 4.87%, Scotiabank ticks all the boxes for a defensive addition to a portfolio, while a 6.6% annual earnings growth projection is fairly good for a Canadian banker at the moment.
Adding solid gold stocks is a smart move right now
Check out something sturdy such as Lundin Mining (TSX:LUN). It’s got a good track record, shown by a five-year average past earnings growth of 21.6%, a clean balance sheet (see a low comparative debt level of 0.3% of net worth), and it’s fairly valued, with a P/E of 16.7 times earnings. Throw in a dividend yield of 2% and 25.7% expected annual growth in earnings and you have a winner.
Moving on, adding Enbridge (TSX:ENB)(NYSE:ENB) to a portfolio would provide both growth (see a projected five-year return of 20.17%) and defensiveness to a portfolio, and makes for a solid counterweight investment when buying shares in anything potentially volatile. While the spectre of low oil could continue to haunt the markets in 2019, diversified Enbridge has such a large market share that it’s less of an issue here.
With a five-year average past earnings growth of 33% that beats Scotiabank’s past earnings growth average of 5.3% for the same period, Enbridge is a passive income investor’s dream at the moment, with a high dividend yield of 6% matched with a 34.7% expected annual growth in earnings. It’s getting better in the balance sheet department, too, with a level of debt to net worth being reduced over the past five years, from 142.1% to 88.7%.
The bottom line
While Enbridge’s P/E of 33.7 times earnings is on the high side, an investor can’t have everything, and the rest of this sturdy ticker’s stats are solid. Meanwhile, adding Scotiabank and a sturdy gold miner to a TSX index portfolio are among the strongest moves a long-term shareholder can make at the moment, especially if passive income and growth are high on the agenda.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. Enbridge and Bank of Nova Scotia are recommendations of Stock Advisor Canada.