On Monday, the TSX Index showed signs of life, rising 2.76% by the end of the day. Following the passage of a $107 billion aid plan, investors got more optimistic about Canada’s chances of beating COVID-19. However, the TSX remains down nearly 30% from its all-time highs, and may have further to fall.
Just recently, the benchmark WTI oil price fell to $20 – its lowest since 2002 – while Canadian crude sank to $7.8. This is a bad sign for the TSX. Weak oil and gas prices generally will lead to weak results from energy stocks – and the TSX has a lot of those.
With that said, there are still plenty of great stocks in today’s market. Not all industries will see their earnings decline as a result of COVID-19 and the oil price crash. In fact, some appear to be doing better than ever. As you’re about to see, stocks in “essential” industries, that don’t depend on discretionary spending, could make it through this crisis unscathed. The following are three to consider buying in April.
Canadian National Railway
The Canadian National Railway (TSX:CNR)(NYSE:CNI) is Canada’s largest railroad company. It ships $250 billion worth of goods annually, over an expansive network that touches three coasts. CN’s rail network goes as far south as New Orleans and as far north as Prince Report. This gives the company an advantage in long distance, cross-border rail transportation.
There are a few reasons why CN may be a good buy right now.
First, as a company that ships essential items (grain, coal, petrochemicals), it won’t be forced to shut down due to COVID-19.
Second, it transports raw commodities that are used heavily in essential industries like grocery and utilities.
Third, the company’s weekly metrics suggest it’s doing well. In its most recent week, it grew its RTMs by 5% year over year.
Railroads are generally impacted severely by recessions, but the current downturn is expected to be short lived. In the meantime, as a company that’s at least permitted to operate, CN should out-perform in the next few months.
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Like all utility stocks, Fortis will be able to operate normally through the current crisis. As a utility, its service falls squarely into the “essential” category. Additionally, its revenue stream shouldn’t be impacted too much if the current crisis turns into a full-on recession. Utilities generally perform better than average during recessions, owing to their indispensable services.
Like all utilities, Fortis is a fairly recession-resistant business. However, FTS has done better than most utility stocks over the past decade. Thanks to its geographically diversified asset base and emphasis on growth, it has acquired one of the longest dividend growth streaks on the TSX.
Dollarama Inc (TSX:DOL) is one retail stock that is set to do well in the current environment. Thanks to its grocery items, it’s able to continue operating as an essential service. That in itself is a big plus. However, there’s much more to the story than that. As a dollar store, Dollarama offers below average prices on many of the items it sells. As a result, it may be well positioned to thrive in the event of a recession.
During the global financial crisis of 2008 and 2009, Dollar Tree saw its stock price increase by 200%, largely because of cash strapped consumers seeking lower priced alternatives to common items. The same phenomenon could benefit Dollarama in the months and, potentially, years ahead.
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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 Andrew Button owns shares of Canadian National Railway. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of and recommends Canadian National Railway. The Motley Fool recommends Canadian National Railway.