At any given time, your portfolio is vulnerable to several macro factors. This includes weak markets and market crashes that are occasional occurrences and sector-specific problems that may impact only a segment of your portfolio. Then there are ever-present factors like inflation that are always eating away at your savings though the pace may vary with economic factors.
The right growth stocks that have the resilience and business model to survive in weak markets may help keep your portfolio afloat in weak markets and grow ahead of inflation.
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A grocery and pharmacy retailer
Metro (TSX: MRU) is engaged in the two most secure segments within the retail business: food and pharmacies. It has a massive chain of 975 food stores and over 645 pharmacies. There are multiple brands under each domain, each with its own consumer base. The chain is concentrated in Quebec and, to an extent, in Ontario.
The stock’s performance was quite exemplary during the coronavirus-driven market crash. The stock barely fell and was up well before the rest of the market. Since it didn’t experience an unnatural surge during post-COVID optimism that pushed many of the stocks up, there wasn’t a brutal correction.
As a result, the stock’s performance over the last five years (almost 63%) was quite decent. It’s enough to double investors’ capital in a decade if it continues to grow at this pace.
A waste management company
Waste management is one of the few businesses that remain relevant regardless of economic and market conditions. This is one of the primary strengths of U.S.-based Waste Connections (TSX: WCN). The other strength is its market presence. It offers solid waste management services to retail and commercial clients in 41 U.S. states and six Canadian provinces, covering a massive consumer base.
The company is also well positioned to offer services related to new recycling and waste-management needs of the market associated with an electric vehicle and renewable boom, primarily batteries. This may open up new growth avenues for the company. It’s already a powerful growth stock and has risen by 85% in the last five years alone. It also pays dividends, but the yield is less than 1%.
A utility company
Utility businesses are another category that enjoys safety in a wide array of weak markets, and Hydro One (TSX: H) has built up on that core strength. The primary market the company operates in is rural Ontario. As a result, it has a massive geographical presence in the province. Since it’s a cost-intensive operation, the chances of another utility company penetrating Hydro One’s market are quite low.
This strength reflects in the stock’s performance as well. It has risen by about 97% in the last five years alone. It’s also a relatively generous dividend payer currently offering its payouts at a yield of about 3.1%. The current valuation isn’t attractive, but this combination of growth and yield is worth considering, even at an overvalued price.
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Foolish takeaway
Stocks like these are not perfectly immune to extreme cases like market crashes, but they are usually the first to bounce back, or at least, they typically recover faster than the bulk of the market. This makes them ideal anchors for a portfolio in weak markets.
