We’ve heard a bit of chatter about a market correction from various pundits. Indeed, investors don’t need to react to such dire forecasts. Any time a market rally goes strong for a good period of time, there’s always bound to be calls for a bit of a dip. Indeed, it’s only healthy for a bullish stock market rally to have a few pitstops.
Even without a 10% fall from peak to trough (that’s the definition of a correction), I think investors should be ready to buy if any miniature dips in the road occur. Think a drop of 5-9%. Further, not all stocks contribute to a market sell-off evenly. We found that out last year, as tech fumbled the ball.
Market correction calls should not be taken as gospel. Oftentimes, such calls are proven completely wrong, even ill-timed. Occasionally, one will look right, and the caller will look like a genius. In any case, timing markets is a waste of time, as too is subscribing to any one strategist’s opinion, especially if it’s nearsighted in nature!
Over the near term, markets will always be unpredictable. Don’t try to predict it. Instead, focus on individual businesses and be ready to buy if the opportunity presents itself.
In this piece, we’ll look at two stocks to buy to weather market choppiness as it happens.
Fortis
Fortis (TSX:FTS) is a utility stock that’s fresh off a correction of its own. Though shares have steadily climbed in recent sessions, I still view a lot of value to be had in a rather low-risk name that could inch higher, even if the market rally goes nowhere from here.
The stock’s 0.2 beta implies shares are less likely to be rattled by broader market woes. After sinking lower since its May peak while the market rally picked up, I’d look to rotate into the value play here, perhaps in the place of a white-hot tech name that’s already rocketed double digits on a year-to-date basis.
I’m not a huge fan of taking profits in winners. However, if a valuation no longer makes sense, the prudent thing to do is to trim a bit. Fortis stock yields 4.02%. That’s a nice payout for any investor. At 19.2 times trailing price-to-earnings, count me as a fan of the risk/reward here and now.
Hydro One
Hydro One (TSX:H) is perhaps even stabler than Fortis. It’s a utility company that also sports a low beta and a nice dividend yield (3.2% at writing). Though the yield is lower, with a higher trailing price-to-earnings ratio, I do think the slight premium is warranted if safety is what you seek.
The company has a massive economic moat surrounding its cash flows. Recession or not, the stock has what it takes to hold steady in the face of turmoil.
Further, the last five years have been a relatively smooth ride upward! Despite its boring nature, the stock is up a whopping 88% over the past five years, even without dividends factored in. That’s impressive and goes to show that stable defensive dividend payers can help you build meaningful wealth.
