While Canadian energy and banking stocks are usually held up as among the safest and most defensive investments when it comes to the TSX index, there are several other areas that sometimes get overlooked. From materials to consumer staples, here are four healthy stocks that may offer surprising hiding places to domestic investors during a potential widespread market correction.
Pizza Pizza Royalty (TSX:PZA)
The premier pizza stock on the TSX index, Pizza Pizza Royalty could stand tall through a recession thanks to its business model of providing quick, affordable meals. Though its 3.9% expected annual growth in earnings is on the low side, there are several reasons to stack shares in Pizza Pizza Royalty, from a high dividend yield of 8.56%, to correspondingly low market ratios (a P/E of 11.8 times earnings and P/B of 1.1 times book).
Viemed Healthcare (TSX:VMD)
With a focus on in-home healthcare solutions across the United States, Viemed Healthcare is headquartered in Lafayette, Louisiana, but listed on the TSX index. As such, it provides exposure to the U.S. healthcare system, but not to the NYSE or NASDAQ. One-year returns of 105.7% far outperformed the Canadian healthcare industry, as well as the TSX index itself.
Viemed Healthcare insiders have only sold shares in the last three months, and in fairly high volumes, though with a decent 25.7% expected annual growth in earnings on the way, growth investors may want to take a second look. A past-year ROE of 29% shows that Viemed Healthcare knows how to make good use of shareholder funds, while one-year past earnings growth of 24.5% denotes a sturdy business model.
The TSX index’s leading methanol stock, Methanex, provides instant exposure to North America, the Asia Pacific, Europe, and South America. A strong track record is shown by a one-year past earnings growth of 80%, while the quality investor should take note of Methanex’s significant 36% ROE for the past year. A dividend yield of 2.35% is on offer for investors looking for a geographically diversified materials stock.
Methanex has mixed market ratios at present, with a P/E of 7.9 times earnings indicating some potentially hard times ahead, while a P/B of 2.9 times book denotes overvaluation based on assets. Two more red flags are waving for Methanex: its negative projected outlook in earnings, and its level of debt to net worth, which has gone up over the past five years from 62.7% to 91.6%.
Premium Brands Holdings (TSX:PBH)
Another food stock, this sometimes overlooked TSX index gem has a decent 28% expected annual growth in earnings backing up a moderate dividend yield of 2.47%. Premium Brands Holdings has a sturdy track record, with positive one- and -five year past earnings growth rates of 21.7% and 45.3%, respectively. Its level of debt has declined in the last five years, from 158.4% to 137.6% today, though valuation remains somewhat high, with a P/E of 25.5 times earnings.
The bottom line
Pizza Pizza Royalty’s level of debt to net worth has dropped over the last half a decade, from 18% to an even healthier 16.5%; this clean balance sheet combined with a meaty dividend yield make it an appetizing option for a recession-ready investor. Viemed Healthcare, meanwhile, is a healthy stock with a clean balance sheet and fair P/E of 18 times earnings.
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. The Motley Fool owns shares of PIZZA PIZZA ROYALTY CORP and Viemed Healthcare Inc.