The coronavirus pandemic created an incredible buying opportunity. Unfortunately, the window of opportunity disappeared as quickly as it appeared. If you want another chance to buy TSX stocks at insane valuations, the time to prepare is now.
There are two companies in particularly that should top your list. The first has one of the best tracks records in Canadian history, and its founder believes the stock is a buy. The second is one of the most reliable businesses on the planet, capable of protecting your portfolio from almost any economic downturn.
Knowing which TSX stocks to buy during the next crash has never been more important. Let’s dive in.
Buy the best
Fairfax Financial (TSX:FFH) is run by the best stock picker in Canada, Prem Watsa. Many call him the Warren Buffett of Canada. It’s not hard to see why. Since 1986, Fairfax stock has generated 15% annual returns.
You can think of this TSX stock as a miniature Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B). Berkshire is worth $500 billion, while Fairfax is worth only $15 billion, but they run the same strategy.
Both own insurance businesses that produce regular cash flow. The leaders of each company, Buffett and Watsa, are in charge of investing that cash.
Berkshire and Fairfax have performed so well over the years due to the investing skills of their managers. Watsa, for example, completely sidestepped the 2008 financial crisis by taking out massive bets against the U.S. housing market. Right now, he’s betting big on Fairfax itself, repurchasing more than $100 million in shares.
After the COVID-19 crash, Watsa called FFH shares “ridiculously cheap.”
“In 35 years since Fairfax began, Watsa says he’s never seen Fairfax shares sell at a bigger discount to their intrinsic value,” Bloomberg reported. If another market downturn hits, trust this investing legend by taking a long-term bet on Fairfax.
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This TSX stock is ready
Another bear market is closer than we think.
In June, the Financial Times reported, “A vast majority of investors believe stock markets around the world are overvalued, as concerns over a new surge in coronavirus cases hang over the rapid recovery in prices since March.”
“Nearly 80 per cent of fund managers shepherding a combined $600 billion of assets think that stocks are too expensive, the highest share in records going back to 1998,” the publication revealed.
There’s only one TSX stock I trust during a market collapse: Hydro One Limited (TSX:H).
Hydro One is a utility company. It owns transmission and distribution assets that cover 98% of Ontario. If you buy power in the province, chances are that it was delivered to your via Hydro One’s network.
Because the business has a near-monopoly on its market, the government regulates how much it can charge customers. This limits upside, but notably, it also limits downside.
Prices are set years in advance, and electricity demand doesn’t waver much during a recession. That means Hydro One’s finances are barely impacted during a market downturn.
If stocks turn volatile and another bear market rears its ugly head, prepare to buy this safe-haven stock.
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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.
The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends FAIRFAX FINANCIAL HOLDINGS LTD and recommends the following options: short January 2021 $200 puts on Berkshire Hathaway (B shares), long January 2021 $200 calls on Berkshire Hathaway (B shares), and short September 2020 $200 calls on Berkshire Hathaway (B shares). Fool contributor Ryan Vanzo has no position in any stocks mentioned.