A bear market looms due to recent events, including bank failures outside Canada and falling oil prices. As the TSX continues to flip-flop, many investors want to shift to defensive mode and add stability to their stock portfolios. If you need to make such a move, three industrial stocks are safer options.
Canadian Pacific Railway (TSX:CP), Waste Connections (TSX:WCN), and Russel Metals (TSX:RUS) are outperforming, notwithstanding the challenging environment. The respective businesses thrive and will thrive some more in the years to come.
A pipedream to reality
Canadian Pacific Railway got the green light to build the only single-line rail network connecting Canada, the United States, and Mexico. The US Surface Transportation Board (STB) has approved the merger of the $101.7 billion railroad company and Kansas City Southern (KCS).
The US STB saw several benefits in this historic combination that should drive economic growth. Besides an increase in rail network investments, the merger will create jobs and stimulate or enhance competition. Under the setup, Canadian Pacific will exercise control over KCS beginning on April 14, 2023.
However, a seven-year oversight period should ensure that the newly formed CPKS mitigates environmental impacts. The parties must also preserve competition, protect railroad workers, and promote efficient passenger rail. The stock trades at $106.14 per share (+5.03% year to date) and pays a modest but super-safe 0,72% dividend.
A large-cap stock and industry leader like Waste Connections is a solid investment come hell or high water. The $48.2 billion company provides dumpster rentals and waste management services. It serves eight million residential, commercial, and industrial customers in Canada (six provinces) and the U.S. (43 states).
Management said 2022 was an extraordinary year because of strong operational execution and over 10% solid waste pricing. For 2023, Waste Connections projects revenue and net income growth of 30.8% and 55.3% to $8.05 billion and $618.5 million, respectively, versus last year.
The industrial stock isn’t a high-flyer but a steady performer. At $184.62 per share, investors enjoy a +3.08% year-to-date gain and a sustainable 0.75% dividend. WCN’s total return in 3 years is 66.6%, which translates to a compound annual growth rate of 18.5%.
Russel Metals is one of the industrial sector’s top performers in 2023. At $33.62 per share, the year-to-date gain is a fantastic 18.1%. Moreover, if you invest today, you can partake in the attractive 4.49% dividend. RUS is a high-growth stock, owing to the 160.2% return in three years (40% CAGR).
The $2.1 billion company distributes metals in North America and generates revenue from business segments such as metals service centres, energy field stores, and steel distributors. Stable steel prices and modest price increases in key products helped Russel in late Q4 2022.
Management expects the favourable trend to continue or extend over the near term. Market analysts are bullish despite the 14% decline in net earnings to $371.9 million in 2022 versus 2021. Their 12-month average price target is $40.17 (+19.5%).
Thus far, in 2023, the industrial sector (4.8%) is the second-best performer after technology (+16.7%). While the headwinds are violent lately, Canadian Pacific Railway, Waste Connections, and Russel Metals have solid fundamentals to overcome them.