Do you want stunning growth and robust passive income over the next few decades? Here’s a look at where I think you invest $1,000 today!
March 2020 may be the best and scariest time to start investing in stocks if you’re a beginner. The Canadian stock market is plunging while the world grapples with the serious consequences of an unexpected pandemic. Fortunately, that means first-time investors with some cash to spare can buy into the market at reasonable valuations.
Invest in consumer staples
Consumers may need to cut back on travel and luxuries during an economic crisis or pandemic. But they may also have to double-down on food and supplies. In fact, federal Health Minister Patty Hajdu recommended citizens stockpile food and medicine over the next few weeks as the government tries to contain the crisis.
That means grocery chains such as Alimentation Couche-Tard (TSX:ATD.A) and Dollarama (TSX:DOL) should serve as safe havens for consumers and investors over the course of this year.
Couche-Tard is more geographically diversified, with over 15,000 stores across the world. This presence includes the United States, Europe, Mexico, Japan, China, and Indonesia. That makes the company less vulnerable to an economic shock in any particular region.
Meanwhile, the company pays out less than 10% of earnings in dividends, has $1.2 billion in cash and cash equivalents on its books and has plenty of room for acquisition-driven growth in the near future.
Meanwhile, Dollarama’s stock took a massive hit in recent months. The stock is down 23.5% from its 52-week high in August 2019. Now it trades at a mere 22 times trailing earnings. Earnings should hold up well over the course of 2020, in my opinion, which means Dollarama could be undervalued at the moment.
Additionally,the recent acquisition of Dollarcity in Latin America diversifies the company’s portfolio and gives it a runway for international growth that could be on-par with Couche-Tard.
It’s also easy to forget that the company has plenty of room to grow on its home turf. Dollarama currently controls less than 20% of Canada’s discount retail market, and is not a top player in North America, which means the runway for expansion is longer than most investors realize.
Both stocks are excellent buy-the-dip opportunities, in my view, and opportunities where I’d invest $1,000.
Not only is Fortis a leader in an industry that is widely considered to be immune to economic cycles, but it is also in relatively great financial shape. The company generates enough cash flow every year to cover its hefty dividend twice over. Its debt burden isn’t too high for a utility, and the sharp drop in interest rates this year could further lower the company’s cost of capital.
In other words, Fortis is on-track to keep boosting dividends for the next five years. That makes it the ultimate steady growth stock to own during an economic crisis, and is the reason I believe you should add it to your “forever” portfolio if you have $1,000 to invest.
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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.
The Motley Fool recommends ALIMENTATION COUCHE-TARD INC. Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.