Don’t let all the recession chatter cause you to delay buying your first stock for too long. We’ve all heard about the calls for a correction in recent weeks. Further, there seems to be way too much emphasis on just how hard the “landing” will be once the economy finally does dip into negative growth.
Indeed, it’s hard to tell precisely when we’ll be in a recession. It’s certainly easier to know after the fact, once the data is in the books! Though some may be placing bets on expectations for a hard, soft, or moderate landing, I’d argue that many may be discounting the potential for the economy to narrowly avoid a recession.
Even if Canada faces a recession in the coming quarters, the best investors tend to know how to navigate their way to a profitable year. Remember, just because the averages fall into the red does not mean your portfolio has to, especially if you’re defensively positioned with quality names that tend to fare well when things get really sour from a macro perspective.
Value investing through times of economic pain
What separates good investors from truly great ones? Their performance and ability to navigate through environments where stocks don’t always march higher.
2022 was a rocky year for many portfolios. But those who threw in the towel when things seemed ugliest (last fall) stood to miss out on one of the best market rallies since the one that started in the depths of the coronavirus-driven 2020 stock market crash.
It can be so easy to position yourself for a solid retirement. You don’t need a pay a money manager a 2-3% fee to manage your funds. I believe you can do better if you commit to continuous learning and growth.
Without further ado, here are three value stocks that could move higher, even if a recession sends the TSX Index and S&P 500 back into a correction or bear market.
Fortis
Fortis (TSX:FTS) ought to be a core holding for any Tax-Free Savings Account or Registered Retirement Savings Plan fund that aims to do better than the averages during times of recession. Fortis stock has been an ugly ride for investors, especially since peaking back in May. The stock has slid more than 8% from its May 2023 high and sports a dividend yield that’s around the 4% mark again. I think wise investors looking to do well in all seasons should strongly consider the name on weakness.
You won’t get a lot of surprises (to the upside or downside) from the utility. However, you will get a value proposition that may very well be better than bonds, even in today’s high-rate environment.
You’re getting a rock-solid defensive dividend grower at 19.2 times trailing price to earnings. Sure, Fortis won’t be a name you’ll brag about, but it will be one that can help guide you higher when others around you feel the pain of economic downturns.
Fairfax Financial Holdings
Fairfax Financial Holdings (TSX:FFH) seems like just another insurer and holding company. It’s so much more, though. The main reason to own the company is not just for recent outperformance and relative value but for the wonderful management team.
Prem Watsa is known as Canada’s Warren Buffett for a reason. He’s a super-smart contrarian value investor who, in some way or another, finds a way to keep the ship moving steadily forward through even the most turbulent waters.
At below $1,000 per share, FFH stock is still a great buy in my view, as investments continue to deliver while the company gets better at underwriting.
