It looks like a second market crash is unfolding in September. As of this writing, the TSX was down 5% for the month, about halfway to a correction. Other indexes, like the NASDAQ Composite, are already there. In this environment, it’s easy to give in to panic. We just got out of one major crash, now we’re heading into another.
However, it’s best not to give in. While the post-COVID-19 economic recovery is slowing, it’s still underway. Further, it’s possible to construct a portfolio of stocks that can perform well even in the midst of a recession. By investing in such stocks, you can still build wealth, even as the market is in general decline. With that in mind, the following are three stocks to build wealth during a market crash.
Loblaw (TSX:L) is a grocery store that operates a variety of grocery chains nation-wide. Its flagship store goes by various names depending on the province (Loblaw, Atlantic Superstore, Dominion, etc) but is basically the same otherwise. It’s the market leader in the Canadian grocery industry.
In market crashes brought on by recessions, grocery stores tend to do fairly well. The reason is that they sell staple items that people can’t easily cut out of their budgets. In the second quarter, Loblaw partially delivered. Its profit was down 41%, but revenue was up 7.4%. The reason for the lower profit was various COVID-19 costs like pandemic pay and benefits. Absent those factors, it would have been a solid quarter. Compared to many industries, which actually lost money during the pandemic, it arguably was a solid quarter.
Fortis (TSX:FTS)(NYSE:FTS) is one of the most dependable long-term dividend stocks on the TSX. It has raised its dividend every year for 46 years. In 2008 and 2009, the company grew its earnings for two years in a row, despite the recession going on at the time. In the second quarter of this year, adjusted earnings rose from $0.54 to $0.56. Investors generally buy utilities to provide safety amid market volatility. Earnings wise, Fortis has delivered. Its stock is down for the year, but the company’s solid earnings make the dividend safe.
Dollarama (TSX:DOL) is Canada’s largest dollar store chain. Dollar stores and discount retailers are generally known for being recession-resistant. The reason is that they benefit when customers start price shopping to lower their budgets. In the 2008/2009 recession, Wal-Mart saw sales surge as cash-strapped consumers went bargain hunting. The same phenomenon applies to dollar stores.
In the second quarter, Dollarama absolutely trounced Bay Street’s expectations. In the quarter, the company grew sales by 7.1%, earnings by 2.2%, and same-store-sales by 2.5%. That’s despite many of its locations being closed! Like most businesses, Dollarama had to close some locations because of the pandemic. But the surge in sales at other locations was so strong that the company posted bottom-line growth. It’s simply a phenomenal stock to hold in a market crash.
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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.
Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.