Your investing strategy will likely change over the years.
When you’re young, you have the unique advantage of being able to plan decades in advance. As you approach retirement, however, capital preservation becomes more important. During retirement, income is often the biggest priority.
Some stocks can give you multiple benefits in a single investment, including growth, value, and income.
If you’re over the age of 50, these three stocks should help create a balanced portfolio capable of growing in value and limiting downside risk.
Suncor Energy (TSX:SU)(NYSE:SU)
On February 14, Berkshire Hathaway disclosed a 10.8 million share stake in Suncor, nearly 1% of the $70 billion company. With Warren Buffett’s stamp of approval, investors and analysts alike started flocking to the beaten-down Canadian energy sector.
What does Buffett like most about Suncor? His bet likely stems from the company’s ability to weather any part of the commodity cycle. Suncor’s secret weapon: refineries.
Back in December, I wrote that “certain tailwinds like cost-effective production gains and earnings stabilization from its refining arm could position the company for a rebound year.” In reality, the companies refining arm did in fact stabilize its earnings through last year’s turmoil.
Today, Suncor owns enough refineries to process more than 75% of its volumes. Because refining margins are often counter-cyclical with oil prices, investing in Suncor stock can provide a rare level of stability in an otherwise turbulent industry.
Fairfax Financial Holdings (TSX:FFH)
Investing in Fairfax Financial is a simple pitch. By purchasing this stock, you’re outsourcing your investment decisions to one of the greatest investors of the past few decades.
Since the 1980s, Prem Watsa has grown Fairfax’s book value by around 20% per year — a track record that rivals Warren Buffett’s Berkshire Hathaway. Both investors have similar strategies of buying and holding a concentrated portfolio of stocks for decades at a time.
This stock is the epitome of stability. During the recent financial crisis, many stocks like Fairfax lost 50% or more of their value. Even Berkshire Hathaway stock dropped by 20% at times. Fairfax stock hardly budged.
If you want to maintain your upside potential while limiting downside risk, Fairfax shares look like the ideal opportunity.
Enbridge (TSX:ENB)(NYSE:ENB)
Enbridge stock looks like a dream for those who want the rare combination of growth, stability, and income.
Since 2006, Enbridge stock has risen by more than 180%. The TSX Index rose by just 40% over the same period.
This rise came despite the company paying out huge chunks of its profits. Today, its dividend yield stands at 5%.
Even more encouraging, the company operates a business model that is remarkably resilient against both shifts in the economy and volatility in commodity prices.
While the Canadian energy sector has struggled in recent years, Enbridge has enjoyed great success. That’s because the issue for most oil producers has been oversupply. Enbridge has used this problem to its advantage, upgrading its existing pipelines while planning for several more.
Recent reports show that Enbridge is asking customers to commit to eight-year contracts to secure capacity on its new pipelines, a testament to its market power.
While Enbridge operates in the volatile energy sector, its unique business model allows it to turn a profit in nearly any part of the cycle.
