The stock markets are finally reacting to the coronavirus threat this week, with major indexes turning negative. With markets resembling the onset of the financial crisis of a decade ago, investors are looking at a potential threat to the global economy — a true “black swan” event, if the coronavirus outbreak spills over into a pandemic.
With a downturn comes value opportunities, though, and with the markets taking a hit, there are bargains galore at the moment. But investors should refrain from buying stocks simply because they’re cheap; some homework still needs to be done. As Warren Buffett prescribes, investors should seek long-term value creation and understand the businesses that they are buying a stake in.
Three excellent choices for the risk-averse Canadian exist in Fortis (TSX: FTS)(NYSE: FTS), Northland Power (TSX: NPI), and Manulife Financial (TSX: MFC)(NYSE: MFC). Covering utilities, green power, and insurance, all three stocks are essential buy-and-hold choices for the extreme long-range investor looking for assets that will not only survive a prolonged downturn but will also provide regular, dependable income.
Fortis represents the best of Canadian utilities, and the thesis for holding it during a market crash is clear: all households and businesses need power. Meanwhile, Northland Power satisfies a strategy that involves stripping out fossil fuels from a portfolio and replacing them with assets that tap into the green economy — a global trend that will become extremely important, as the world turns away from hydrocarbons.
Manulife, as the country’s most popular insurer, is also a recession buster. No matter what the economy does, no matter how badly impacted the stock markets, people need insurance. Manulife is a market leader in this area, and, as such, its stock supports a wide-moat strategy built around only the most stable dividend-paying companies. The stock is on sale (along with the rest of the TSX), down 16% this week.
Paying a 4.8% dividend yield, Manulife is a fairly rich stock and definitely worth packing in a TFSA or other long-term savings account. With its 3.8% yield, Northland Power is another rewarding stock to buy once and forget about. Its wind power operations are particularly interesting and bring strong geographical diversification to the energy production segment of a portfolio.
With its 3.3% dividend yield and exemplary track record of payments, Fortis is as strong as its name suggests. One of the few stocks on the TSX that’s been only negligibly impacted by the sell-off this week, Fortis is down just 2% on average over the last five days. Its 36-month beta of just 0.12 further indicates its extreme resilience to market turbulence, making for a reassuring stock to pack in a portfolio.
The bottom line
Stocks fell into a correction Thursday, with markets in their worst condition since the 2008 financial crisis. But this doesn’t mean that investors should stop buying. The golden rule is to know what you hold and carry on holding. However, contrarians and strict value investors alike looking for the best low-risk, high-quality stocks have ample opportunity to buy knocked-down shares right now.
