2 Great Canadian Stocks to Buy Now and Hold Forever

Diversified energy dividend stocks like Algonquin Power and Utilities Corp. (TSX:AQN)(NYSE:AQN) are on sale right now.

The CNN Fear and Greed Index is firmly in the red this week, indicating that investor sentiment is riddled with extreme fear. Before we look at seven of the key characteristics of the correction rattling the stock markets, plus two great stocks to buy and hold, let’s briefly review five guidelines for investing during a downturn.

A five-step “black swan” playbook

First of all, investors should know what they’re holding in their stock portfolios. As Warren Buffett would put it, shareholders need to understand the businesses they’re invested in. Second, a TSX stockholder should see long-term value in their holdings.

Third, investors should review their wish list for oversold stocks and get buying. A fourth tenet of recession investing holds that would-be shareholders keep some liquidity on hand in order to double down on deepening discounts as the market worsens. Finally, investors should hold onto their stocks and have faith that the markets will return to normal in the long term.

Seven indicators of fear

Stock price strength is low, indicating fear. This is indicated by the ratio of 52-week highs to lows, moderately skewed toward underperformance. The spread of junk bond demand of 1.87% in extra yield above safer corporate bonds is also higher, further indicating fear. As well, 24-month put and call options are currently strongly skewed toward the former.

Market momentum is down at a two-year low, with the S&P 500 1.62% below the 125-day average – a reliable indicator of extreme fear with implications for Canadian stocks. For the data-focused investor, the McClellan Volume Summation Index showed 23.65% more of daily NYSE volume declining than advancing. The CBOE Volatility Index (VIX) is also flashing at 30.84.

Safe haven demand is high, with bonds outperforming stocks by 7.57% in the last 20 days of trading, the weakest such stock performance in two years. Perhaps the most recognizable indicator to the casual investor, the relative performance of bonds to stocks currently signifies extreme fear in the markets.

Two TSX stocks to buy and hold

There’s a case for buying quality stocks at knock-down prices right now. Down 10% Friday, defensive Algonquin Power & Utilities is a top TSX stock to buy on weakness. Its diversified power production operations feed a tasty 3.5% dividend yield. It’s a key stock for renewables investment, with exposure to hydroelectric, wind, solar, and thermal power.

Another great stock currently on sale is popular tech ticker, Shopify. Down 11% at the end of a terrible week, the contrarian thesis is strong here: Up 144% in the past 12-month period, the e-commerce giant is a true Canadian success story strongly biased toward the upside.

For steep capital appreciation and access to the growth trend in online shopping, this low-risk retail stock has strong positive momentum.

The bottom line

Algonquin Power & Utilities and Shopify are recession-proof stocks for one reason: Even if the coronavirus becomes a pandemic, its effect on energy and online sales will be less severe than on other aspects of the economy.

While energy production is essential, e-commerce is likely to outlive its brick-and-mortar analogues. As such, both TSX stocks are strong buys.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify.

More on Dividend Stocks

canadian energy oil
Dividend Stocks

Here’s a 5.9% Dividend Stock That Pays Out Monthly

Peyto Exploration pays a monthly dividend yielding 5.9%. Here's how its low costs, hedges, and reserves growth support that payout.

Read more »

senior couple looks at investing statements
Dividend Stocks

1 RRIF Withdrawal Could Trigger a Much Bigger Tax Bill Than You Expect

A big RRIF withdrawal can trigger a double hit from income tax and an OAS clawback, so planning matters.

Read more »

holding coins in hand for the future
Dividend Stocks

3 High-Yield Dividend Stocks to Buy Now for Passive Income

These three high-yield dividend stocks look ideal to boost your passive income.

Read more »

woman gazes forward out window to future
Dividend Stocks

This TSX Dividend Stock Is Down 13%: Here’s Why to Buy and Hold Forever

This TSX stock recently increased its quarterly dividend by 3.2%, extending its record of annual dividend increases to 26 consecutive…

Read more »

diversification and asset allocation are crucial investing concepts
Dividend Stocks

Got $5,000? Here Are the Canadian Stocks I’d Buy

Here's how I would take a $5000 beginner portfolio and buy 5 quality Canadian stocks for a mix of defence,…

Read more »

the word REIT is an acronym for real estate investment trust
Dividend Stocks

I’m Holding These 2 High-Yield Dividend Stocks for a Decade

These two high-yield dividend stocks are ideal for long-term income-seeking investors.

Read more »

coins jump into piggy bank
Dividend Stocks

Telus Cut Its Dividend ­­– Is the Stock Worth Buying Now?

Telus’ dividend cut is a setback for existing shareholders, and reflects a broader shift in Telus’s financial strategy to lower…

Read more »

man looks worried about something on his phone
Dividend Stocks

The Market Has Punished This Dividend Giant Enough: I’d Buy Before Sentiment Turns

BCE’s dividend cut scared investors away, but the smaller payout may now be safer and leave room to repair the…

Read more »