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No Appetite for Risk in the New Year? Buy These Defensive Stocks

Just because it’s a new year doesn’t mean that the risk outlook has changed. Indeed, the markets are bringing their baggage with them, as investors step uncertainly into 2020. Fear and greed are still locked in a stultifying tug-of-war with many of the stressors that threatened the investment landscape last year still casting shadows.

The year’s first quarter will see a continuation of some of the major themes that came to prominence in the latter half of 2019, from the prospect of long-term lower oil to a U.S.-China trade war that is on hold rather than conclusively over. There are other sore points ahead, too. For instance, while Boris Johnson managed to capture public approval last month, this month’s Brexit is still laden with unknowns.

Popular in 2020: Consumer staples and gold

Classic defensive plays are still a safe bet as we ring in the new year, and when it comes to consumer staples plays, dividend stocks like Restaurant Brands (TSX:QSR)(NYSE:QSR) are a tempting source of income. Its payout, currently returning a shade above 3%, makes Restaurant Brands a go-to for takeout dividends.

Add this stock to a dividend portfolio light on consumer staples and you’ll gain exposure to a growth-oriented business. Not only are all three of its franchises are in expansion mode, but Restaurant brands is also getting deep into the alternative protein game.

With meat-free options cropping up across its menus, the owner of Burger King and Popeyes is a surprise medium-exposure route to the green economy. It’s also on sale this week, down by more than 2%.

Tim Hortons has been something of a sore spot for Restaurant Brands investors, though no major developments had been in the news for a while. That all changed this week when memories of a rash of negative headlines a while back were brought to mind by the announcement that Tim Hortons’s boss Alex Macedo is out after a weak Q3 that saw the coffee-and-bites outlet down 1.4% in comparable sales.

Barrick Gold stole the show in 2019, becoming the go-to mega miner for investors bullish on gold producers. However, Newmont Goldcorp should not be overlooked, either. The latter gold miner has been divesting itself of non-core assets, making for a more maneuverable contender with stripped-down risk and stronger cash flows. It’s also a solid gold play on value, with competitive market ratios.

The real draw in Newmont is arguably its potential for steady capital appreciation. While it does pay a small handout — see a dividend yield of 1.28% — the stock gained 26% last year and is likely to carry on appreciating through 2020 and beyond. And yes, value is key: Newmont’s price-to-book ratio is currently 1.5, making it a shade better value than Barrick Gold, which is trading at 1.6 times book.

The bottom line

From the globe’s largest miner of gold to one of the world’s most significant fast-food empires, investors have a couple of strongly defensive plays in Newmont and Restaurant Brands, respectively. While consumer staples are perennial cash cows, gold is also looking hot for the year. Both asset types are strong buys, as uncertainty continues to influence the markets.

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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC.

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