It’s not easy to be an investor, with TSX stocks staring down a recession in the early innings of 2023. With the Bank of Canada raising interest rates again but signalling it’s hitting the pause button, there’s reason for optimism. Indeed, the central banker left the door open for further hikes if inflation doesn’t back down so quickly. It also left the door open to potential rate cuts if a recession proves bumpier.
The Bank of Canada has been a step ahead of the game versus most other global central banks, the Federal Reserve, included. Whether the Bank of Canada is right to hit that pause button before its G7 peers remains to be seen. Regardless, I do think TFSA investors shouldn’t fear a recession after a full year of bearish moves in the U.S. and sideways trading in Canada.
In this piece, we’ll consider three TSX stocks that have what it takes to power higher as the economy cools off over the coming months. It’s these types of firms that I think should form the core of any long-term investor’s portfolio. Recessions happen. They need not be feared, only prepared for!
Without further ado, let’s get right into the names.
Hydro One
Hydro One (TSX: H) is a retiree-friendly stock that also happens to be one of my favourite risk-off plays. As a utility with a dominant position in the Ontario electric transmission market, Hydro One is a name that isn’t exactly a nail-biter going into earnings. Hydro One’s rock-solid operating cash flow and lack of volatility make it a terrific holding for when times get sour.
Despite the wonderful recession-fighting traits of the stock, you must be careful not to overpay. After a turbulent year, the appetite for boring low-volatility dividend plays like Hydro One has gone up. At 21.7 times trailing price-to-earnings (P/E), Hydro One stock isn’t a bargain by any stretch of the imagination. Still, the dividend remains rich (2.99%), while the beta — a metric of how volatile a stock is versus the market — is low at 0.28.
Given the rocky road ahead, I’d say Hydro One is a great pickup, even at new highs.
PetValu Holdings
PetValu Holdings (TSX: PET) may not have a regulated cash flow stream like Hydro One. What it does have, though, is a terrific management team that knows how to expand without running the risk of overextending itself. Yes, PetValu is a brick-and-mortar retailer with an improving digital presence. However, it’s a physical retail play that can continue to outmuscle peers in the pet supply space.
As it turns out, pet supplies and services are quite defensive in nature. Good times or bad, our pets need necessities. And in a mild recession, I think PET stock can continue dodging and weaving past headwinds that have knocked out many firms within the discretionary retail space. At 28.3 times trailing P/E, PET stock isn’t cheap. Then again, it doesn’t deserve to be.
Jamieson Wellness
Jamieson Wellness (TSX: JWEL) is a vitamin maker that’s really stalled out in recent years. Despite the rocky road, the wellness play still seems to have long-term growth trends intact. The brand is head and shoulders above most in the industry.
Further, its Chinese expansion could really heat up on the other side of the recession. For now, Jamieson is a pricy (29.3 times P/E) play with defensive traits. The 0.33 beta and growing 1.91%-yield dividend make for an intriguing buy ahead of a downturn.
