3 TSX Stocks That Can Stand Up to a Recession

Hydro One and another two TSX stocks that could outperform in 2023 as recession takes hold.

| More on:

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.

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Pet Valu. The Motley Fool has a disclosure policy.

More on Investing

Nickel ore is mined from the ground.

Cameco vs. Barrick Gold: 2 Undervalued Mining Stocks Set to Unearth Gains

Cameco (TSX:CCO) and Barrick Gold (TSX:ABX) are top mining stocks that look to be on sale right here!

Read more »

stock research, analyze data

Could Dollarama Stock Reach $150?

After gaining over 44% in the last 12 months, can Dollarama stock keep up this exceptional growth rate and climb…

Read more »

Tech Stocks

3 Reasons to Buy Shopify Stock Like There’s No Tomorrow 

Shopify stock fell 25% after reporting disappointing guidance. Should investors buy the dip and hold the stock for the long…

Read more »

grow dividends
Dividend Stocks

3 Canadian Stocks With a Real Chance of Doubling Your TFSA’s Value

Three outperforming Canadian stocks can help TFSA investors double their account balances.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

3 No-Brainer Stocks I’d Buy Right Now Without Hesitation

At any given time, the market may have certain stocks that offer a powerful combination of reliability, potential, valuation, etc.,…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

3 Canadian Growth Stocks I’d Buy Under $30

These under $30 Canadian growth stocks are well-positioned to capitalize on mega trends such as e-commerce, the electrification of vehicles,…

Read more »

Gas pipelines
Stocks for Beginners

3 Reasons to Buy Enbridge Stock Like There’s No Tomorrow

Enbridge (TSX:ENB) is a superb long-term option. Here's why you should buy Enbridge stock right now and hold it for…

Read more »

money cash dividends
Dividend Stocks

This 8.39% Dividend Stock Can Pay $100 Cash Every Month

Consider investing in this monthly dividend stock at current levels to lock in high-yielding monthly distributions to create a good…

Read more »