TSX stocks at large continued to soar higher, despite the recent acceleration of coronavirus cases. While economies are gradually stabilizing after the deep wound in the last quarter, a full recovery might take time. Investors can consider re-balancing their portfolios with an increased focus on crash-resilient stocks. I will cover three such TSX stocks that might outperform in market downturns.
A $35 billion Waste Connections (TSX:WCN)(NYSE:WCN) is an integrated waste management services company. It reported fairly strong earnings growth in a relatively slow-growing industry in the last few years.
Waste Connections aggressively expanded its market share, mainly driven by its inorganic growth in rural markets. Its recession-resilient cash flows make it a relatively secure bet amid this COVID-19 pandemic situation.
Waste Connections stock has been quite consistent, soaring more than 200% in the last five years. This year as well, it has increased by 14%, notably outperforming the TSX Index.
Notably, the stock looks expensive after its recent rally. However, its non-cyclical nature of business and earnings stability make it an attractive bet for long-term investors.
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Aviation is one of the hardest-hit sectors amid the pandemic. Though CAE (TSX:CAE)(NYSE:CAE) is not a pure-play airline company, the stock has exhibited a similar weakness recently. CAE shares have cratered 50% amid the pandemic and have been slow to recover.
CAE develops simulation technologies for civil aviation, defence, and healthcare verticals. It generates approximately 45% of revenues from the healthcare and defence segments and the rest from the aviation.
Though aviation forms the larger part of its consolidated revenues, contributions from the defence and healthcare segments will play a crucial role in CAE’s recovery.
CAE stock looks fairly valued at the moment after exhibiting a renewed weakness since last month. Notably, CAE is a better bet in the aviation and allied industries due to its attractive valuation and diversified earnings base.
Investors can consider renewables power player Boralex (TSX:BLX) in the current market scenario. It is a $3 billion company that generates power from wind, solar, hydropower, and thermal, primarily in Canada and France.
It has managed to double its capacity in the last five years and currently operates more than 2,000 megawatts. Its counterparties include EDF, Hydro Quebec, etc., which have solid financial positions. Interestingly, ageing nuclear power plants, mainly in France, offer strong growth potential for Boralex due to its large presence.
Boralex has managed decent revenue growth of an average of 15% in the last three years. However, it reported a loss in 2018 and 2019. Its recent capacity additions should accelerate its earnings growth in the next few years.
Boralex stock has soared almost 30% so far this year. It was relatively faster to recover after the COVID-19 market crash and is currently trading at its all-time high.
The stock looks expensive from the valuation standpoint at the moment. Conservative investors can wait for a pullback. But those who believe renewables will gain significant ground in the next few years can consider Boralex for its solid long-term potential.
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.
Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned. The Motley Fool recommends BORALEX INC.