Canadian markets have fallen 12%, while last year’s top-performing stocks have lost 50%–60% this year. But this decline is not exhaustive. Some TSX stocks have notably outplayed broader markets. So, here are three such Canadian names that could be safer to invest in in bull as well as bear markets.
Dollarama
Canadian value retailer Dollarama (TSX:DOL) has firmly proved its vigour this year. While markets have consistently traded lower, DOL stock is comfortably making new highs. It has gained 33% this year and 62% in the last five years.
Be it a bull or bear cycle, Dollarama has kept growing steadily over the last several years. That’s mainly because its unique business model stands tall and aids its earnings growth and margin stability. Dollarama’s value proposition turns out to be more rewarding for customers in inflationary periods.
Note that Dollarama is not just a retailer. Apart from offering a broad range of merchandise, it also has a significant say towards vendors when it comes to the customization and packaging of the product. This provides it with an important competitive edge over peer retailers.
Moreover, its extensive presence with over 1,431 stores across Canada offers convenience and fuels its topline growth. It plans to add 600 more stores by the end of the decade.
So, considering its earnings growth potential and distinctive business model, DOL will likely remain strong in almost all business cycles in the long term.
Constellation Software
Many Canadian tech names have cratered more than 30%-40%, but Constellation Software (TSX:CSU) stock has remained resilient and dropped only 12% this year. CSU stock has returned 180% in the last five years and 1,880% in the last 10 years.
Constellation is one of the biggest tech companies in Canada. It operates a group of smaller vertical market software companies that have a dominating market share in their respective domains. Plus, Constellation serves a large addressable market of private and public customers, which maintains its revenue stability.
Many tech companies witnessed pressure on their revenues and margins this year amid rising interest rates and inflation. However, CSU stood strong on both fronts, with gross margins close to its long-term average of 35%. This speaks for its business strength and ability to make returns for investors even in troubling times.
Canadian Natural Resources
Oil and gas companies have unique pricing power. That means they can pass on the incremental cost burden to their customers. Consumer companies, at the same time, do not have such advantages due to significant competition. That’s why energy companies stand tall in inflationary environments, as their profits and margins remain largely intact.
Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) is one of the top investment bets among TSX energy stocks. Driven by higher oil and gas prices, it has seen substantial financial growth in the last few quarters.
The balance sheet has notably improved while margins have markedly expanded. As a result, the company issued a decent special dividend in August. Considering the total annual dividend for the year, CNQ stock yields a handsome 6%. CNQ stock has soared 55% this year.
Note that oil prices have again started moving higher this month on supply woes. Oil companies like Canadian Natural Resources will be the beneficiaries of this trend. CNQ will likely continue to see free cash flow growth and further balance sheet strengthening, creating more shareholder value.
