The markets are nothing if not tumultuous right now, which makes it hard for the low-risk investor to steer a portfolio through the headline blur and hype. But three distinct themes have emerged during the second act of the pandemic. As communities begin to cautiously reopen, the markets are shifting.
Here’s what investors need to know about three of the strongest emergent themes right now.
Canadian banks are solid (for now)
Investors eyeing the Big Five’s earnings season were expecting worse results last week, and the banks ultimately won the day. The Big Five pulled in $5 billion in collective profits in its most recent quarter. However, loan-loss provisions totaling $11 billion across the five largest Canadian moneylenders were also laid on the table.
This combination of income and safety provisioning strengthens these stocks in the near-term. It should also help long-term investors decide whether to add Canadian banks to a portfolio – and sleep better if they do.
Would-be shareholders in the Big Five can choose between the emerging market growth potential of Scotiabank, the Stateside strength of TD Bank, and the high yield of CIBC.
Home entertainment stocks are popping
The entertainment industry is undergoing something of a crisis at present. While the issue may seem to affect Hollywood exclusively, the entire entertainment industry is at risk on three distinct fronts. First, online content streaming is disrupting the industry.
Second, the pandemic has almost entirely put the kibosh on producing new content. Third, theatres remain closed, impinging studio profits.
Meanwhile, locked-down households continue to consume content. Shows, movies, and other digital content are one of the main struts of society right now, providing both escapism and the much-needed familiarity of social norms.
Names like Netflix continue to dominate the tech stock landscape, while corporations like Amazon and Disney vie for the biggest piece of the pie.
Investors should consider BCE both for its Crave media platform and the wide-moat telecom aspect of its business. Rogers Communications would be a similar play, but with a strong sports media emphasis. Rogers is also a buy for access to some of Canada’s biggest sports teams, such as the Raptors and Maple Leafs — exposure that makes Rogers a key “recovery rally” buy for a resumption of sports activities.
Supply chain solutions are hot right now
Businesses are increasingly reliant on the optimization of supply chains as a locked-down world struggles to operate. Supply chain solutions have caught the attention of investors, driving share price appreciation in core stocks like Kinaxis.
This tech growth theme has become hot property due to the disrupted logistics landscape currently impacting industries around the world.
Investors can expect supply chain automation to continue to swell as businesses cut down capex, reduce waste, and tighten up their operations. Any system that can help surviving businesses carry on surviving is worthy of investment right now.
TSX investors can also mull buying shares in Descartes Systems Group, another key player in this space.
