My June 2023 stock picks are a mix of seasonal stocks that surge towards year-end and resilient stocks that tend to outperform in a weak economy.
Shopify stock
June and August are good times to buy consumer and e-commerce stocks as they trade lower ahead of new product launches and festive shopping (Black Friday and Cyber Monday sales). Shopify (TSX:SHOP) is leading the e-commerce space in Canada and accounts for 10% of the U.S. e-commerce market.
A surge in e-commerce volumes could attract investors towards Shopify stock. To benefit from that surge, invest today and face short-term risks. There are concerns that elevated inflation could discourage consumer spending on discretionary products. The Fed even expects a recession, which could pull down consumer demand. And Shopify’s high exposure to America makes it a risky stock.
But Shopify stock has rallied more than 50% between June and the first week of February in three of the last four years. In 2021, it surged till November but had a setback from the tech stock selloff in December. This year could be similar to the past three years. You can buy some shares in June and sell them in the first week of February or when the stock price reaches $120 — a 50% upside.
Descartes stock
While e-commerce is a driving force that makes me bullish on Descartes Systems (TSX:DSG), there are other reasons too. Descartes is a resilient growth stock. It is among the few tech stocks that recovered to its 2021 peak. A surge in e-commerce volumes and liquefied natural gas exports to Europe are growth catalysts for this supply chain solutions provider.
Descartes stock has rallied 15-20% in the second half of the year over the last five years, irrespective of the economic conditions. It is because the company’s solutions cater to logistics and supply chain challenges, be it high volumes or geopolitical setbacks like the Russia-Ukraine war. June is a good time to buy Descartes stock and sell it once it crosses $125 — an 18% upside.
Nuvei stock
Nuvei (TSX:NVEI) stock is at a sweet spot, down 24% in May, as the company reported a net loss in the first quarter due to a one-time expense from its Paya acquisition. The payments platform has been moving with the e-commerce momentum, as e-commerce represents 90% of Nuvei’s transaction volume. But the Paya acquisition can change this mix by opening doors of enterprise payments from non-cyclical verticals like healthcare business-to-business goods and services, utilities, government, and education.
These non-cyclical industries could help Nuvei reduce its downside, and strength in e-commerce and crypto could boost its upside. You can buy and hold this stock for a few years, as it could double your money during the economic recovery.
Resilient stocks
The above three stocks are volatile and may fall into a recession. You can reduce your downside risk by investing in the below contrarian stocks that outperform in a weak economy.
Canadian Utilities (TSX:CU) is unaffected by macroeconomic conditions, as you pay utility bills even in high inflation. These stable cash flows have helped the company pay regular quarterly dividends for over 50 years and even grow them in most years. If you buy the stock below $37, you can lock in a 4.89% dividend yield that will grow even in a weak economy. Also, the stock trades in the $30-$40 range, limiting your downside. You can hold this stock for a long term to build your retirement portfolio.
Barrick Gold (TSX:ABX) stock is a buy at its current level of below $23 to reduce downside risk. The stock will likely fall further in a bearish market but bounce 50-70% in two to five months if the economy plunges into a recession. Gold has an intrinsic value and is considered a safer alternative to currency. When the economy weakens, the dollar weakens. Investors rush to gold to protect the value of their money. Instead of buying gold in the gold rush, buy it now when everyone is selling.
Bottom line
A mix of these contrarian stocks can increase your upside in a strong economy and reduce your downside in a weak economy.
