Your Tax-Free Savings Account (TFSA) portfolio is meant for investing prudently over the years and decades. It’s not for trading or speculation. In fact, too many trades in your TFSA portfolio could bring forth negative attention from tax authorities. Indeed, Charlie Munger’s “sit-on-your-bum” approach to investing may be the best strategy to leverage with your TFSA. With a recession ahead, market volatility could create bumps in the road that long-term investors may wish to take advantage of by buying quality merchandise at freshly marked-down prices.
It’s not easy to buy bear market dips, but doing so could help you get the most out of every investment dollar. Without further ado, let’s consider two very high-quality defensive plays that may be off the radars of most Canadian investors.
Without further ado, consider shares of grocery firms Metro (TSX:MRU) and North West (TSX:NWC). Indeed, inflation and recession fears haven’t really rattled the top grocery plays. Even if you expect 2023 to be a continuation of 2022, I think there are still ways to land a gain if you’re willing to average down on any declines that come your way.
Metro is a Quebec-based grocery that had a solid past year, clocking in just north of 6% gains. Indeed, Metro hasn’t been surging as furiously as some of its peers in the grocery scene. Still, the stock has steadily chugged higher. In the new year, Metro noted that more price increases will be in the cards, as inflation pressures continue to sweep the nation.
As a grocer that hasn’t taken advantage of “greedflation,” I think Metro will have little issue passing on higher prices to consumers. In any case, Metro seems like a steady defensive to smooth out the bumps that could be in the road. The stock trades at 19.6 times trailing price to earnings (P/E), a modest multiple for such a high-quality grocer with drugstore exposure.
Finally, online sales surged by 40% year over year as of the latest quarter. I’d look for the digital segment to continue to heat up further from here.
North West is a retailer and grocer that serves remote communities in Canada and the United States. The company has done well in this niche and has been resilient, even amid the increased cost of transportation. The stock is in the midst of a three-year consolidation channel between $33 and $40. It’s been a struggle to break out. However, I think NWC has all the tools it needs to march higher, as it looks to manage through another challenging year.
The 4.2% dividend yield is enticing, as too is the mere 14.2 times P/E multiple. North West is a mid-cap dividend gem, in my books. And with a 0.62 beta (which implies less correlation to the broader stock market), NWC stock seems like relatively smooth sailing relative to most other dividend payers in this market today.
The bottom line for Foolish investors
Metro and North West are great defensives that don’t get enough coverage. With reasonable multiples and the means to make it through another tough year, I’d place both names atop my watchlist this spring season.