How to Buy Air Canada Stock in a Volatile Market

As the market froth continues, Air Canada (TSX:AC) has been generating a lot of press. But is the stock worthy of the hype?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This is a market to buy the dips and sell the rips, as the axiom goes. Investors in stocks most beaten up by the pandemic were presented opportunities to do a bit of both this week. Stocks such as Air Canada (TSX:AC) saw a lot of bullish action earlier in the week.

Up 20% in just five days, Air Canada has shown the market just what a recovery could look like. But that recovery isn’t here yet. A beat-up quality pick for an eventual recovery, Air Canada is likely going to go back on sale while the latest vaccine hope leaches out of the markets.

Recovery upside could be stratospheric

Three distinct global movements are still trending behind the scenes that investors may be aware without necessarily factoring into their strategies. These are U.S. protectionism; the continuing phenomena known as the Asian Century; and economic instability in the European Union. The pandemic is likely to both exacerbate and complicate these trends, with the result of eventually reordering global markets.

That’s why investors should already be looking beyond post-pandemic recovery scenarios. Instead, TSX shareholders should ask, “Which names will be thriving 10 years from now?” Taking an ultra-macro view, only the most defensive of stocks should be in a long-term portfolio. Energy production and agricultural inputs are two of the most resilient of dividend-paying industries.

For instance, investors may wish to pair Enbridge (TSX:ENB)(NYSE:ENB) and Nutrien (TSX:NTR)(NYSE:NTR). While a hydrocarbon thesis has been systemically weakened in the long term, Enbridge is a wide-moat behemoth. It also has “green power” chops, boasting increasingly impressive renewables exposure. For example, Enbridge has invested heavily in wind farms since the early 2000s. Nutrien is also defensively wide moat, commanding huge market share in the global potash space.

These are both sterling examples of predictable dividend stocks. But, of course, these all-weather buys can also be counterbalanced with riskier near-term picks. Depending on one’s appetite for adventure, a barbell portfolio can be built around businesses at both ends of the volatility spectrum.

Pick barbell stocks to manage risk

In 2021, the trend is unlikely to be your friend. Unless, of course, that trend turns out to be the reversal of former trends. The swing from growth stocks to value stocks will necessitate a reorganization of personal investment portfolios. But unlike a black swan market, which catches everybody by surprise, at least a recovery can be planned for.

Air Canada is therefore an apt foil to names like Enbridge and Nutrien. It commands a central position in a grounded industry, ready to take to the skies at the drop of a hat. A consensus buy, an official end to the pandemic will almost certainly see sudden explosive upside in this market leading commercial aviator — perhaps as much as 80%.

This near-term upside potential complements longer-term passive income. Enbridge and Nutrien’s dividend yields of 8.5% and 4.4%, respectively, make for a defensive counterweight to Air Canada’s riskier near-term outlook. This technique makes use of the vagaries of the current market by capitalizing on both short-term momentum and long-term predictability.

Should you invest $1,000 in Granite Real Estate Investment Trust right now?

Before you buy stock in Granite Real Estate Investment Trust, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Granite Real Estate Investment Trust wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends Nutrien Ltd.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Dividend Stocks

3 Canadian REIT Stocks to Buy and Hold for the Next Quarter-Century

These three Canadian REITs trade cheaply and are highly reliable, making them some of the best stocks you can buy…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Practically Perfect Canadian Stock Down 24% to Buy Now and Hold for Life!

CNR stock is a top Canadian stock for investors, especially with shares down on the TSX today.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

The Best Canadian Stocks to Buy Right Away With $30,000

If you have $30,000 you're willing to invest, these are some of the first Canadian stocks to consider on your…

Read more »

rail train
Dividend Stocks

What to Know About Canadian Pacific Railway Stock for 2025

CP stock has now gone through a major merger, so what do investors have to look forward to?

Read more »

ways to boost income
Dividend Stocks

Top Canadian Value Stocks I’d Buy for Dividend Growth and Appreciation

If you are looking for income and capital appreciation, here are three Canadian value stocks for a great total return…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Canadian Stock to Buy With $2,000 Right Now

The company’s powerful combination of growth, income, and value, positions it well to deliver solid returns, making it a smart…

Read more »

Transparent umbrella under heavy rain against water drops splash background. Rainy weather concept.
Dividend Stocks

This 10.6 Percent Dividend Stock Pays Cash Every Single Month

Are you looking to invest for a rainy day? This 10.6% dividend stock pays cash every month, irrespective of the…

Read more »

A worker gives a business presentation.
Dividend Stocks

Market Dip: Opportunity or Risk This April?

This market dip might have investors worried, but should they be excited instead?

Read more »