3 Top Growth Stocks With Social Distancing Built-In

Here’s why some top stocks like Shopify Inc. (TSX:SHOP)(NYSE:SHOP) are such a strong buy for growth under quarantine conditions.

| More on:
Coronavirus written newspaper close up shot to the text.

Image source: Getty Images

Last year saw mounting uncertainties that hinted at a downturn. This year, the downturn is already upon us and threatens to become something much nastier: a full-blown depression. Unemployment levels are rocketing and output is shrinking. So how should investors react, and what qualities should a portfolio reflect right now? It’s time to break out the recession investing playbook.

Move into “3D” investing: Dividends, defensiveness, and diversification

BCE (TSX:BCE)(NYSE:BCE) is a wide-moat pick in highly competitive space. However, it holds its own with a third of the wireless market share. BCE is a strong buy when it comes to social distancing. It’s a play for media as well as telecom upside. The Bell Media parent company also operates content streamer Crave and licenses Showtime and HBO in Canada.

While BCE might not be a big tech stock packed with momentum, it’s arguably as close as the TSX gets to our very own Netflix. The lockdown measures that have crushed other sectors certainly support digital media, however, which means that social distancing puts stocks like BCE in the spotlight. BCE has performed well amid a frothy market.

The good qualities outweigh the bad with this stock, but it does depend on one’s stance toward Canadian telecom. BCE pays a 5.8% dividend yield. However, its high (98%) payout ratio leaves no room for growth and may be a point of concern.

Consumer staples stocks are a strong choice right now

Loblaw Companies (TSX:L) may look a little unassuming at a glance. It’s a retail stock, after all. And retail is being hit hard by the lockdown. But a business empire emerges when you stop and look at Loblaw. This deceptively defensive consumer staples name is a must-have for a diversified portfolio.

The list of brands covered by Loblaw is impressive. Joe Fresh, President’s Choice, Shoppers Drug Mart and more. Even more impressive, perhaps, is its 25% share price appreciation in the last four weeks. This stock is a strong buy for the defensive income investor. Its 1.7% dividend yield and 42% payout ratio make for well-covered payments with plenty of room for growth.

Moving onto tech, we have a strong thesis for buying and holding. Tech stocks are often resilient to economic stress due to their lower overheads. Remote work is emerging as a strong play, for instance, as are e-commerce names like Shopify.

Shopify (TSX:SHOP)(NYSE:SHOP) doesn’t pay a dividend – not yet, anyway. Right now, this name is all about defying gravity. This is the kind of stock Warren Buffett missed out on when he famously passed on Amazon. It’s got two other strong qualities that make it a buy: defensiveness and diversification.

Its e-commerce model makes it the perfect pick for an online world. The flexibility of that model also means that Shopify’s clients are strongly diversified.

Shopify is also a strong play for cannabis upside. The legal pot stock space may seem an unlikely hero during a period of extreme economic stress. However, the cannabis sector has been proving surprisingly resilient and will help bolster Shopify and supply growth.

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.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. David Gardner owns shares of Amazon and Netflix. Tom Gardner owns shares of Netflix and Shopify. The Motley Fool owns shares of and recommends Amazon, Netflix, Shopify, and Shopify and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon.

More on Coronavirus

little girl in pilot costume playing and dreaming of flying over the sky

Air Canada Stock: How High Could it go?

AC stock is up 29% in the last six months alone, so should we expect more great things? Or is…

Read more »

eat food

Goodfood Stock Doubles Within Days: Time to Buy?

Goodfood (TSX:FOOD) stock has surged 125% in the last few weeks, so what happened, and should investors hop back on…

Read more »

stock data
Tech Stocks

If I Could Only Buy 1 Stock Before 2023, This Would Be It

This stock is the one company that really doesn't deserve its ultra-low share price, so I'll definitely pick it up…

Read more »

Aircraft Mechanic checking jet engine of the airplane

Air Canada Stock Fell 5% in November: Is it a Buy Today?

Air Canada (TSX:AC) stock saw remarkable improvements during its last quarter but still dropped 5% with more recession hints. So,…

Read more »

Airport and plane

Is Air Canada Stock a Buy Today?

Airlines are on the rebound. Does Air Canada stock deserve to be on your buy list?

Read more »

A patient takes medicine out of a daily pill box.

Retirees: 2 Healthcare Stocks That Could Help Set You up for Life

Healthcare stocks offer an incredible opportunity for growth for those investors who look to the right stocks, such as these…

Read more »

sad concerned deep in thought

Here’s Why I Just Bought WELL Health Stock

WELL Health stock (TSX:WELL) may be a healthcare stock and a tech stock, but don't let that keep you from…

Read more »

healthcare pharma

WELL Stock: The Safe Stock Investors Can’t Afford to Ignore

WELL stock (TSX:WELL) fell 68% from peak to trough, and yet there's no good reason as to why. So now…

Read more »