It’s been a highly turbulent time for North American markets. Last week saw one of the worst stock market performances since the financial crisis a decade ago. This was followed by the Fed cutting the U.S. interest rate, sending the American markets tumbling. Wednesday finally saw the Bank of Canada follow suit with our own interest rate cut.
Seeing optimistic pundits turn bullish on gold and dividends suggests a change in the wind. After this week’s rate cuts, investors have been on the right track if they were fleeing to safety.
Today we’ll take a look at which stocks to pull back on and which ones to buy.
What to sell
Enbridge is looking like a liability as the thesis for holding oil stocks deteriorates. A market crash could decimate oil stocks, even with a possible OPEC production manipulation. Holding fossil fuel stocks in the current economic climate is therefore looking like a weak play.
Just look at Enbridge’s performance straight after the rate cut. The pipeline stock was down by 2% as investors finally woke up to risk Thursday morning.
Magna International is one of the best North American stocks for access to the auto industry. It’s also a popular pick to gain exposure to the electric vehicle boom in China.
However, it could be a source of risk in a portfolio during the current crisis. The stock has rallied this week amid profit beats and a positive 2020 outlook, making this a canny time to trim it from a portfolio.
What to buy
Newmont (TSX:NGT)(NYSE:NEM) is a top TSX stock for gold exposure. While its sheer size, quality of assets, and improving bottom line alone make the stock a buy, its positive attributes don’t end there.
Add the company’s copper assets and you have exposure to the green economy via the red metal’s use in electric vehicles. Throw in a dividend and Newmont is a strongly defensive play for passive income.
Newmont rallied this week, up 4% amid ratcheting risk. The fact that it jumped a couple of points after the rate cut is suggestive of the attitude among investors right now.
Stashing shares in the number one gold producer – and a dividend payer to boot – is a smart move for a market crash. Gold is a strong buy, with prices rallying and even perma-bull Jim Cramer getting behind the yellow metal.
Build on that portfolio strength with energy and growth in the green power sector with a stock like Northland Power. This is a potentially high growth play, as well as another source of passive income.
It’s a particularly strong stock to buy for international wind power exposure as the green power revolution continues to go mainstream.
The bottom line
Investors have some tough decisions to make right now. Trimming Magna International on strength and Enbridge on fossil fuel headwinds is a compelling move.
Buying and holding Newmont and Northland Power is equally strong. Newmont remains one of the most stable TSX stocks for both safety and passive income.
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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 Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends Magna Int’l.