As bad as the markets have been over the past several weeks, there’s little reason to believe that things are going to get much better in the foreseeable future. As more people fall ill with the coronavirus and the pandemic puts economies worldwide to a screeching halt, there’s a very real possibility that the worst is still to come.
For investors, the temptation may be to hold the course and hang on for things to get better, but that may not be the best path to take. There are many good value options out there today in industries that are safe bets to recover that investors may want to consider.
Safety in utility stocks
Utility stocks are typically safe places to invest in regardless of the current economic conditions. Emera Inc (TSX: EMA) is a good example of that. It serves customers in Canada, the U.S., and Barbados and its top line has risen by 134% over the past three years as acquisitions have helped bolster the company’s reach and made it a much stronger, diversified investment.
It trades at a modest 19 times earnings and less than two times its book value. Entering this week, the stock was down just 9% since the beginning of the year. It’s not a big dip given that the TSX is down twice that amount.
But it’s a stock that investors should keep a close eye on because if widespread selloff continues, Emera may dip even more in price even though its business remains strong.
That’s why it can be an attractive buying opportunity for investors. And it’s not just because of its price — Emera also pays a great dividend. Quarterly payments of $0.6125 mean that investors can earn an annual dividend yield of 4.8%.
Emera’s increased its payouts by 8% over the past two years, and shareholders can expect more of the same moving forward given its strong financials.
Over the past three years, Emera’s operating income’s come in at more than $1.3 billion — more than double the $555 million it generated in 2016. With strong growth and impressive margins, Emera’s an exciting stock to hold and one that can be resilient through any market crash.
Other industries for investors to consider
Investors should also consider industries where face-to-face sales aren’t the norm and that are likely to still perform well even if people are staying indoors. A stock like Microsoft, for instance, can still generate revenue from its subscriptions and products.
Tech companies are generally more resilient in these cases. Not only do they offer digital products, but their employees can also work remotely. BlackBerry Ltd is another company that can play a key role as cities around the world are under lockdown.
If employees have to work from home, there are additional risks to which companies are exposing themselves. And having BlackBerry’s cybersecurity services can help address certain vulnerabilities.
Some companies provide daily essentials, such as grocery stores. Loblaw Companies Ltd may actually see a surge in traffic from people stocking up on food and other essentials. There are many other examples out there.
Ultimately, investors need to assess a business and the impact it’s likely to feel from the coronavirus pandemic. If it’s in a high-risk sector like retail, investors should steer clear of it.
Utilities, tech, and grocery, however, could be safe havens at a time like this.
