Given all the health, economic, and political challenges Canada faces, it can seem bewildering how TSX stocks can continue to soar. Frankly, nobody really knows if markets should keep plowing higher or if we are due for another TSX market crash.
The reality is, both could still be likely. The only way to invest during the pandemic is to invest for both scenarios and have a long investment horizon. The best way to navigate these times is to have a balanced, diversified portfolio with defensive and offensive stocks.
Perhaps you’re sitting on $4,000 and you don’t know how to invest it in July. Well, here are four TSX stock ideas that are perfect for generating consistent, stable long-term wealth.
TSX defensive stock 1: Algonquin Power
If you are concerned about another market crash, one very safe defensive stock to hold is Algonquin Power (TSX:AQN)(NYSE:AQN). Algonquin is a diversified regulated utility and renewable power producer in Canada and the U.S. I like this stock because it provides essential services (water, natural gas, power) that are mostly unaffected by the pandemic.
The company has recently commenced a $9.2 billion capital investment plan that should accrete an adjusted EBITDA CAGR of 15% over the next five years. Currently, Algonquin pays a great 4.7% dividend, which will likely grow at the same rate as EBITDA growth. This is a very solid place to preserve capital, earn some income, and see higher-than-average growth for a utility.
Defensive stock 2: Newmont Corp
The second TSX stock I like here is Newmont Corp (TSX:NGT)(NYSE:NEM). Now is a good time to have some safety exposure to gold. Gold, as opposed to currency, holds its value well in times of inflation, volatility, and economic uncertainty. Gold just topped $1,800 per ounce and is showing strong price momentum.
Newmont is one of the largest gold producers in the world. For every $100/oz increase in gold pricing, Newmont earns $400 million of free cash flow a year. If gold prices stay around $1,700/oz or higher, it could earn upwards of $2 billion of free cash flow this year!
It only needs $1,200/oz to fully fund its 1.6% dividend, so if pricing remains stable, Newmont will have significant free cash that it can use for debt reduction, special dividends, share buybacks, or acquisitions.
TSX offensive stock 1: Enghouse Systems
It’s important to own stocks that are performing in strength during the pandemic. One TSX tech stock that is thriving now is Enghouse Systems (TSX:ENGH). In its second quarter, it reported revenue, net income, and adjusted EBITDA grew year over year by 58%, 64%, and 81%, respectively!
Enghouse is benefiting from strong demand for its remote work solutions such as Vidyo (a commercial video conferencing software). It is an incredibly well-managed company with strong reoccurring revenues (over 50%), and produces significant free cash flow ($50 million last quarter).
Today, it sits on a net cash balance of $162 million, which it will likely deploy into accretive acquisitions this year. The stock is pricey, but this is a very high-quality business that is operating “…in the right place, at the right time.”
Offensive stock 2: Viemed Healthcare
The last TSX stock growing during the pandemic is Viemed Healthcare (TSX:VMD)(NASDAQ:VMD). Recently, the stock pulled back by about 15% from its all-time highs, presenting an attractive buying opportunity.
It is a leading provider of in-home respiratory products and solutions in the U.S. Viemed has experienced a massive uptick in demand for its ventilation products as hospitals try to assist a surge in COVID-19 patients.
Viemed has specialized expertise in respiratory health solutions. Today, its services are more valuable than ever. It projects revenues could grow by more than 70% in its next quarter.
This year will be pivotal in expanding its customer reach and demonstrating the true quality of its business to customers and investors alike.