Defensive growth stocks are hard to come by these days. Indeed, they offer growth for all seasons, making them among the best long-term holds for investors who don’t want to get too involved with the macro environment and economic cycles.
Cyclical stocks, while offering the most upside on upswing, tend to implode like a paper bag when the inevitable downturn kicks in. Defensives, however, are less vulnerable to excessive downside when the time comes for a nasty recession, which is always around the corner.
Most defensives are pretty lacking on the growth front. Think the consumer-packaged goods companies with handsome payouts but little in the way to offer on the growth front for young investors. That said, just because defensive growth stocks are a rare breed doesn’t mean they don’t exist or that you’ll have to pay a massive scarcity premium.
Defensive growth stocks: Growth for all seasons!
Consider shares of Alimentation Couche-Tard (TSX:ATD.B) and Jamieson Wellness (TSX:JWEL), two of my favourite defensive growth companies to own for all seasons.
So, whether we’re rising out of a historic recession or in the later innings of an economic cycle, both companies are well equipped for growth, regardless of the circumstances. That makes them worthy of a fat premium in my books.
At current levels, each TSX stock appears to be heavily discounted. Why? The appetite for speculation has been furious over the past year and a half — so much so that many beginner investors would rather speculate on an asset to make a quick buck rather than settle for a wonderful business at a wonderful price that can improve one’s chances of obtaining wonderful returns over the long term.
Couche-Tard is a convenience retailer that’s grown primarily by M&A over the decades. The company is fresh off some incredible quarterly earnings results, yet investors still seem to be heavily discounting the firm’s longer-term growth profile. The stock popped 3.5% this Wednesday, which, while remarkable, was quite muted relative to the magnitude of the beat the company clocked in.
I think Couche-Tard is a bargain after earnings. As fuel sales ramp up post-COVID, and the company looks to make its next big deal, I think the stock couldn’t be timelier. As an essential retailer, Couche-Tard is better positioned to weather the next storm. Couche-Tard held its own well during 2020 — something I expect come the next downturn.
If anything, the next recession could bring forth opportunity for Couche-Tard, as it looks to scoop up a bargain once the pressure is on for its peers.
Jamieson Wellness is another boring but growthy company that investors shouldn’t sleep on. The Canadian vitamin maker has been around for generations, but it only recently went public. With the funding, the firm has the means to unlock a new leg of growth. It’s not just new product offerings like gummies, sprays, and protein powders that will allow Jamieson to spread its wings into new markets, but it’s also the firm’s plans to expand at the international level.
Undoubtedly, China is a major source of meaningful growth for Jamieson. As a health and wellness company, Jamieson is also on the right side of a secular tailwind that could last for years, if not decades.
In due time, COVID-19 headwinds will fade, and it’ll be off to the races for Jamieson again. For now, the stock is stuck in a bear market, down over 20% from its peak. I think the pullback is a great buy for long-term investors looking for defensive growth at a discount.
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 Joey Frenette owns shares of ALIMENTATION COUCHE-TARD INC. The Motley Fool owns shares of and recommends ALIMENTATION COUCHE-TARD INC.