The stock market recovered too fast from the March lows, while the economy continues to struggle amid uncertainty. The growing discord between the stock market and economy is leading many to believe that another crash is near. Last week’s sharp selloff further strengthened the belief.
However, reopening of the economy, high liquidity, and gradual improvement in the labour market indicates otherwise.
Whether we are heading towards another market crash or not is debatable, a few TSX stocks could continue to do well irrespective of where the market goes. So, if you have some cash, consider buying these TSX stocks with the potential to generate healthy returns.
A top retail-defensive bet
As the outlook for the stock market starts to turn a bit sour, investors should turn to defensive stocks. However, in exchange, investors are likely to generate lower returns for investing in low-risk stocks. While this could be true for the majority of the defensive stocks, it’s not the case with Alimentation Couche-Tard (TSX:ATD.B).
Couche-Tard stock is up over 1,062% in the last 10 years, implying that an investment of $1,000 in its stock would be worth about $11,620 now. Besides, the retailer continues to boost shareholders’ returns by consistently increasing its dividends.
Couche-Tard’s strong retail footprint and strategic acquisitions helps the company to deliver solid financial performance, which continues to drive its stock higher. The retailer’s total revenues have grown at a compound annual growth rate (CAGR) of 13% from fiscal 2011 to fiscal 2020. During the same period, its EBITDA and operating income have increased at a CAGR of 22% and 23%, respectively.
Its stellar operational performance resulted in solid free cash flows, which provided a strong platform for the company to boost investors’ returns. The retailer’s dividends have grown at a CAGR of 26.6% during the period, which is encouraging.
Alimentation Couche-Tard’s recession-proof business, ability to accelerate growth through accretive acquisitions and expansion of e-commerce capabilities are likely to drive its financials in the coming years and lend support to its stock irrespective of where the market moves.
A solid gold stock
As speculation of a recession and a second stock crash is rife in the market, consider adding gold in your portfolio for both stability and growth. The safe-haven asset has generated phenomenal returns this year amid uncertainty and lower interest rate environment. However, instead of buying physical gold opt for buying the shares of the gold producer like Kinross Gold (TSX:K)(NYSE:KGC).
Shares of Kinross Gold are up about 83% year to date, thanks to the higher gold prices and increased production from its low cost mines. As uncertainly looms large, gold prices are likely to trade higher, resulting in solid revenues and margins for Kinross Gold.
Its strong cash position and favourable industry trend are likely to help the company in improving the net debt-to-EBITDA ratio and drive its stock higher.
A resilient energy stock
The pandemic, till now, had no material impact on TC Energy’s (TSX:TRP)(NYSE:TRP) business as it continues to generate predictable cash flows with a high asset utilization rate. Investors should note that the company generates almost all of its adjusted EBITDA from rate-regulated assets or businesses backed by long-term contracts.
The company’s solid dividend yield of 5.5% is very safe. Moreover, it forecasts an 8-10% increase in its dividends for fiscal 2021. Further, it expects to increase its dividends by 5-7% beyond fiscal 2021. TC Energy’s stable cash flows and solid dividend payments are likely to boost investors’ returns even amid a stock market crash.
