Worried About the Stock Market? 3 Companies to Buy and Hold for the Long Term

The current bearishness in the market has created an opportunity to buy fundamentally strong stocks that are trading near their lows due to market weakness.

| More on:
Investor wonders if it's safe to buy stocks now

Source: Getty Images

Economists expect a mild recession in 2023, as the Bank of Canada continues to hike interest rates to 4.25%. The rate hike is impacting businesses and consumers. According to a CTV News article, RBC expects rising inflation and interest rates to reduce an average household’s purchasing power by almost $3,000.

While consumers spending power is decreasing, the Canada Revenue Agency (CRA) is increasing the Tax-Free Savings Account (TFSA) limit to $6,500 in 2023. Households struggling with inflation might take a break from the stock market, maintaining the bearish momentum in the stock market next year as well. 

Should you be worried about the stock market? 

The S&P 500 index is a good way to understand the overall stock market. The market has gradually stabilized over the years; the frequency of market correction reduced to 13 in 41 years and seven in 22 years. Historical data shows that a 10% and 20% dip in S&P 500 Index takes four months to recover. But a 20-40% dip takes an average of 15 months to recover. 

The TSX Composite Index dipped as much as 17% (between the April peak and October bottom), but throughout 2022, the index fell 8.15%. It hints that the correction is gradual even after the tech bubble burst. 

Three stocks to buy and hold for the long term 

The current bearishness in the market has created an opportunity to buy fundamentally strong stocks that are trading near their lows due to market weakness. But their long-term growth remains intact. 

goeasy

As the name goes, goeasy (TSX:GSY) is a stock that grows easily over the long term. A sub-prime lender would probably be the last choice of any normal investor in a high interest rate economy heading into a mild recession.

Past recessions have shown that delinquency rates increase in such an economy. That delinquencies were because of aggressive and lenient lending without mapping the credit risk in a worst-case scenario. But the credit market has matured, and goeasy has created a model that keeps risk in check by increasing provision for bad debt. 

The company sailed through the 2009 sub-prime financial crisis with tepid growth for three years but gained momentum as the economy revived. The stock grew more than 600% between 2013 and 2020 and around 950% by 2022. So those who invested $200 per month in goeasy throughout its three-year bear phase increased their $3,600 investment to $37,700. The stock outperformed the market, despite halving its value in the tech bubble burst. 

Till the third quarter, goeasy’s loan origination grew 47%, as people moved to sub-prime lenders, because prime lenders tightened their credit. goeasy reported the highest percentage of low-risk loan originations, which reduced its provision for loss to 7.58% from 7.68% in the previous quarter.

The company can survive the upcoming recession smoothly and return to its long-term growth when the economy revives. The 2009 opportunity has returned. It’s time to invest $200 per month in goeasy throughout 2023 and hold the stock for a decade for 10-fold growth. 

Two resilient stocks near their 52-week low

TC Energy (TSX:TRP) and Algonquin Power & Utilities (TSX:AQN) stocks are trading near their 52-week lows, as recent events scared short-term investors.

TC Energy’s Keystone pipeline reported its biggest oil spill pulling the company’s stock down 18%.

But the oil spill won’t lead to a dividend cut, as the Keystone pipeline accounts for less than 12% of TC Energy’s net income. The company has resumed the undamaged part of the pipeline. Moreover, the company has many natural gas pipelines coming online in the next four years, which could grow its dividend at an average annual rate of 3-5%.

Similarly, Algonquin stock also fell 40% to its 52-week low, as the rising interest rate increased its interest expense on floating rate debt, affecting its net income. The company is funding its $2.65 billion acquisition of Kentucky Power with $1.2 billion debt, the majority of which is a floating rate loan. It could impact the company’s dividends. But its cash flows would continue to grow in the long term. When the interest rate reduces, the company can increase its dividend, benefitting long-term investors. 

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 Puja Tayal has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

Woman has an idea
Stocks for Beginners

Just Starting to Invest? 3 Smart Stocks to Buy in February 2023

If you're looking for smart beginner stocks to buy, you could look into asset management companies like Brookfield Asset Management…

Read more »

calculate and analyze stock
Stocks for Beginners

The Top 3 Most Shorted Stocks in Canada Today

These TSX stocks may be up now, but short-sellers are betting they're about to tumble in the next few weeks.

Read more »

Growth from coins
Stocks for Beginners

Got $5,000? These 2 Growth Stocks Are Smart Buys

Are you looking for some smart buys for your portfolio? Here are two great options to buy now while you…

Read more »

Young woman sat at laptop by a window
Stocks for Beginners

3 Stocks Beginners Can Buy in 2023 and Hold for Decades

Are you looking for a simple portfolio to get started as an investor? These three stocks are top performers and…

Read more »

railroad
Dividend Stocks

Slow and Steady: Buy this Railroad Stock Now to Win the Race

Investors looking for a solid and growing income should pick up shares in this railroad.

Read more »

A brown bear sitting on a rock
Stocks for Beginners

Where to Invest $10,000 in a Bearish Market

Here are some great options for low-risk and high-risk investors alike.

Read more »

retirees and finances
Dividend Stocks

RRSP Investors: Should You be Worried During a Recession?

RRSP savers might feel like gagging as they watch their investments fall, but stay strong! Especially with these TSX stocks.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Stocks for Beginners

How I’d Build a TFSA if I Had to Start Over

Are you looking to start a TFSA? Here’s how I would build one if I had to start over.

Read more »