2 Stocks to Invest in a Sideways Economy

Not all stocks are equally vulnerable to the weak economy and market, and the right stable investments can help you anchor your portfolio in a weak economy.

| More on:
data analyze research

Image source: Getty Images

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.

A convenience store chain

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.

A utility company

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.

Foolish takeaway

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.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »