Top 2 Stocks That Could Beat the Recession

Recession-resistant stocks like Dollarama (TSX:DOL) should be on your radar in 2022.

| More on:
Cogs turning against each other

Image source: Getty Images.

Investors seem less worried about inflation than a recession. Economic growth has stalled, unemployment could be rising, and consumer demand is sliding. Most companies could see their profits eroded in the year ahead. However, some might prove to be more resilient. 

Here are the top two stocks that could potentially beat the upcoming recession. 

Recession stock #1

Dollarama (TSX:DOL) has cemented its position as a safe haven. The stock has outperformed the overall market this year, rallying more than 22% year to date. The stock could be in for another impressive run in the year’s second half.

Dollarama has remained an investor’s favourite amid waning sentiments in the overall market owing to the fact that its operations appear immune to rising inflation. While operating a chain of dollar stores in Canada, the retail outlet is usually the last to boost prices, even on rising inflation levels. Consequently, it has succeeded in retaining customer loyalty, even with inflation rising.

In the aftermath of the pandemic, Dollarama diversified its product lineup, which appears to have strengthened its long-term prospects and growth metrics. In addition to the cheap products, it is now home to pricier items from the major brand names.

The pricier items have led to a significant increase in revenue. In addition, the retailer has registered an average of 8-10% of same-store sales growth over the past decade. Its net profit has also increased at a compound annual growth rate of 13% over the past 10 years. Its superior and consistent growth is one reason the stock is a top pick in retail.

Dollarama stock is trading at a price-to-earnings multiple of 24. With the broader market bottoming out, Dollarama looks set to continue edging higher, supported by strong earnings prospects and an improving macro environment.

Recession stock #2

Restaurant Brands International (TSX:QSR)(NYSE:QSR) shares are surging high after a roller-coaster first half of the year that saw the stock go down by more than 20%. A solid quarterly report affirming solid international sales growth at Burger King’s and Tim Hortons’s Canadian locations is the latest catalyst for the stock. 

The stock is up by more than 30% over the past months, erasing all the losses accrued in the first half of 2022. The rebound was triggered after the second-quarter report confirmed that inflationary pressures have not taken a toll on the company’s core business.

Net sales in the quarter rose 14% year over year to $1.64 billion, beating consensus estimates of $1.57 billion. The growth came, despite the company being forced to raise menu prices to offset rising food and freight costs. Initially, there were fears that such a move could scare consumers. Consequently, the restaurant chain delivered earnings of 82 cents a share, which is better than the 73 cents that analysts expected.

Tim Hortons recording a 12.2% increase in same-store sales signals that Restaurant Brands’s revenue is increasingly bouncing from the COVID-19-triggered slowdown. The company is benefiting from new cold brew and food menu items to the menu supplemented by collaboration with Justin Bieber.

Despite the recent rally, the stock is still trading far below its 52-week highs of $68. It’s still an undervalued stock and an ideal pick for investors concerned about an economic slowdown. 

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 Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool recommends Restaurant Brands International Inc.

More on Investing

A worker drinks out of a mug in an office.
Stocks for Beginners

3 Stocks to Buy Today and Hold Forever

Looking for stocks to buy today and hold forever? Here’s a trio of options that offer defensive appeal in a…

Read more »


Better Rail Buy: CN Stock or CP Shares?

CP Rail (TSX:CP)(NYSE:CP) looks way too cheap to ignore after the recent bear market turbulence.

Read more »

data analyze research

3 TSX Small Caps to Buy Right Now

Given their high-growth prospects and cheaper valuation, these three small-cap stocks look attractive.

Read more »

rail train
Dividend Stocks

3 TSX Stocks I Own and Will Buy More of If the Stock Market Crashes

These TSX stocks may be down, but don't count them out. In fact, buy up as much as you can…

Read more »

Upwards momentum

3 of the Top-Growing Stocks on Earth

Canadian investors may want to branch out and target top-growing stocks like Exxon Mobil Corp. (NYSE:XOM) in the early fall.

Read more »

A worker uses a laptop inside a restaurant.

3 of the Best Stocks to Buy After Last Week’s Selloff

After many Canadian stocks fell rapidly in price last week, here are three of the best to buy to take…

Read more »

stream movies at home
Dividend Stocks

3 TSX Stocks With High Dividend Yields

As markets continue to sell off, here are three of the best TSX dividend stocks you can buy to earn…

Read more »

A worker gives a business presentation.

3 TSX Stocks That Are Actually Beating the Market

Dependable TSX stocks like Hydro One Ltd. (TSX:H) and Loblaw Companies Ltd. (TSX:L) have beaten the TSX in a harsh…

Read more »