With the possibility of another full-scale market crash within two years of the last one, and the recession reaching historically high levels, the fear of a recession is rising. But the situation is not nearly as dire as it was in 2008, and there are several strong elements (in the economy) balancing those fears.
Unemployment hasn’t been this low in years, and the relevant departments are taking strong, decisive measures to arrest the inflation and the dangerously bubbly housing market.
But even a “gentle” recession is still a recession, and you may want to adjust your portfolio to weather it better. There are several ways to do that, ranging from investing in gold stocks to parking your cash in safe industry leaders. And the latter might prove to be a better long-term holding.
A telecom leader
Telus (TSX:T)(NYSE:TU) is one of the three telecom giants in Canada and the best, most consistent grower. Currently, it’s also offering a juicy 4.7% yield, but the stock’s long-term growth potential, or at least how it’s manifesting since 2009, attracts more investors to this telecom giant. It’s also evolving as a significant 5G player in the Canadian market by investing heavily in the requisite infrastructure.
The telecom market in Canada is quite saturated. All three companies have carved out different pieces of the market for themselves, especially in the significant overlapping domains like wireless and broadband. This is one of the reasons why Telus is pursuing growth in secondary markets, like the acquisition of LifeWorks and its strong home security front.
However, most organic growth is expected to come from 5G, especially if we start seeing some serious traction within the overlap of 5G and IoT.
A power-generation company
Electricity is an evergreen and reasonably recession-resistant business because no matter the economic condition, people still need power as a basic necessity and are willing to pay for it. This makes companies like Capital Power (TSX:CPX) an intelligent investment to curb your fear of the recession. This Edmonton-based company has been around for over 130 years; it is deeply rooted in the communities it serves.
Capital Power is a bit different from many newcomers in this arena, as it still generates a sizeable portion of its power using conventional sources like coal. However, it’s aiming to be off coal by 2024. It’s also investing heavily in renewable sources for power generation.
The company is evolving into a greener version of its former self, and even though the reliance on coal and other fossil fuels may be keeping the ESG numbers of the company down, it hasn’t affected its stock. The stock has mostly gone up since Dec. 2015 and has grown roughly 170% since then. It’s also offering a juicy 4.8% yield to go along with that growth potential.
A renewable energy company
Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) is an excellent holding for a recession or market crash. Not only is it in the electric utility business, but it’s also future-facing and focuses only on renewables.
The portfolio of assets is quite geographically diversified, and since the recession is rarely uniform, the company may fare better (financially) than its peers with geographically concentrated portfolios.
The historical performance of the company has also been quite encouraging. It was a steady grower up until 2018. Then it experienced expedited growth and is currently going through a correction phase, which has pushed the company’s value down 28% so far. This also had a positive side effect: a 3.6% yield.
All three companies have the resilience and market presence to absorb the damning impact of market crashes and recessions while experiencing healthy long-term growth. If you can buy low and stick with them long enough, you might enhance the already attractive return potential by a significant margin.