The Canadian economy is still struggling to gather momentum, and it may be months, if not years, before it’s fully back on track. Uncertain economic conditions can simultaneously create new investment opportunities and prevent a significant number of Canadians from entering the market.
But even conservative investors who like to play it safe can find healthy and resilient companies to invest in when the market is weak.
These companies usually hail from industries that are capable of surviving a weak economy, thanks to their business model. In the current market, two such companies stand out from the rest.
Alimentation Couche-Tard (TSX:ATD) is one of the largest convenience store chains in North America. It has over 14,000 stores in 24 countries, though the bulk of its presence is in North America. The other main business of the company is fuel stations. There are three main brands under the Alimentation name, and each of them has strong recognition and presence in multiple global markets.
The blue-chip stock has been going up quite steadily in the last five years and has risen by about 140% over this period. It also offers dividends, but the yield is quite low.
There are three main reasons why this stock should be a pick in this economy: international presence, business model, and resilience. A strong international presence protects the company from local headwinds. As a convenience store chain that relies more on necessary and routine spending than discretionary spending, it may be sheltered from the worst of what a weak economy has to offer.
As for resilience, the stock was one of the few on TSX to make an incredibly quick recovery after the 2020 crash — in four months.
Utility businesses tend to be resilient against weak economies and bad market conditions; no matter how bad things get, most people prioritize paying their bills over other expenses, which means the revenue stream doesn’t shrink. This makes companies like Hydro One (TSX:H) perfect picks for investors worried about the economy.
As the largest electricity provider in Ontario, the company serves about a quarter of the residents of the process. Its 1.5 million customers are mostly in rural areas, and the company’s transmission network covers about 75% of Ontario’s geographic area. This gives it a strong edge and significantly reduces the chances of another utility company emerging as a major competitor.
It offers a great combination of dividends and capital-appreciation potential. The company is currently offering dividends at a 3% yield and has grown by about 98% in the last five years.
The two stocks have already shown their resilience against bear markets and, unless their fundamental strengths change, may continue to do so in the foreseeable future. Their business models and market presence make them safe picks, especially in a weak economy.