After an end to 2018 that was about as cold as the weather followed by a hot start to the new year, investors are becoming exhausted by the thought that there could yet again be another dip in the markets.
As fellow Fool writer Mat Litalien recently told readers, “May ended up being the worst month of the year for North American markets,” with “the TSX Index [losing] 3.3% of its value.” It seems like those 52-week highs are coming to an end for many stocks on the TSX.
There are a lot of articles out there that will tell you to use this as an opportunity to buy stocks on the cheap, and they’re right! It’s a great opportunity. But what if you don’t want to be buying and selling every couple years or even every couple of months?
That’s why it’s important to find stocks that don’t depend on the markets to see strong performance. Those stocks just depend on how the firm performs.
Nutrien is quickly becoming the giant of global crop nutrients market. The company both provides potash, nitrogen, and phosphate to countries around the world on wholesale contracts and offers a retail division to sell everything from seeds to crop protection for farmers.
Nutrien hasn’t slowed down since it came to the market just last year. It’s been acquiring every company it can to pretty much dictate market prices. And it’s clear why. The company expects to see potash continue to rise significantly, which means the countries that desperately need it — such as India and China — will turn to Nutrien for products. In fact, these and other countries already have.
This means Nutrien is in the position to have free cash flow steadily streaming in for decades to come, and management thinks so too. It’s part of the reason the company has already increased its dividend yield twice this year, which currently sits at 3.25%.
So, what makes this stock crash proof? People need to eat. No matter how you slice it, even if every other area of the market goes down, people will still need food. All Nutrien has to do is continue making itself the go-to producer of crop nutrients.
CNR is already in a strong position no matter how the markets perform, sharing a duopoly with only one other railway in Canada. Even still, CNR is Canada’s largest railway company, shipping across North America along its 20,000 km network. It’s also proven itself useful when oil and gas pipelines are slowed to a stop, picking up the slack and adding even more cash to CNR’s bottom line.
But what’s really exciting about this stock right now is its reinvestment program. The company is currently undergoing a reinvestment in its infrastructure over the next five years due to its increased cash flow. Railways are proven cash cows, and CNR is the king in this sector, generating free cash flow at an average of 15% of sales during the past decade and even 12% of sales right after the last recession.
So, when all is said and done, this company isn’t going anywhere, and neither are investors. Part of that comes from the steady increase in share price, and the rest from the company’s solid payout history of its 1.77% dividend yield with a five-year growth average of 16.2%.
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For investors looking to secure their investments ahead of a potential crash, you can’t get much better than Nutrien and CNR. Both firms offer investors a secure place to wait out any market storm, being pretty much insulated due to the niche each has created within the industries.
Of course, every stock dips from time to time, but buying and holding both of these stocks over the long term will likely give you a solid investment for both market volatility and your future portfolio plan.
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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool owns shares of Canadian National Railway. Nutrien and Canadian National Railway are recommendations of Stock Advisor Canada.