The stock market is always changing. Think of it as a living being, with flux and activity as signs of its “life.” Most investors are interested in specific changes or phases, like bear and bull markets, but you have to deal with the other phases as well, including pullbacks that represent the transition periods between reversals of bearish and bullish trends.
It’s easy to identify the picks when the market is pulling back from a slump for a positive course correction. But when a bullish trend is giving way to a bearish one, you may consider anchoring your portfolio with stable and resilient businesses.
Dollarama (TSX:DOL) is perhaps the most popular value retailer in Canada and dominates in the sales of relatively low-cost items ($5 or less). The chain consists of over 1,000 stores now and has enjoyed consistent financial growth for years. This is a consumer staple segment that may be least impacted by economic downturns, and this stability translates well for the stock.
The 2020 crash offered a good example of the stock’s resilience against weak market conditions and shifts. The stock experienced a slump but was back to its pre-crash value in less than six months. Its business model, performance, and financial resilience make it a good pick for market pullbacks. It’s also a powerful growth that grew over 600% in the last decade, making the choice even more attractive.
Franco-Nevada (TSX:FNV) is one of the largest players in Canada’s gold and precious metal market segments, which gives investors a different type of exposure than gold mining stocks tend to offer. This business model also makes Franco-Nevada less vulnerable to gold price fluctuations, and its growth has been far more consistent than mining stocks.
However, it’s still a gold stock and, thus, has the potential to serve as a hedge against weak markets and pullbacks. It has a history of performing well during market crashes, and even when it falls under the weight of the market, the recovery is usually very swift. Considering its long-term return potential, it’s much more than a short-term/temporary hedge against specific market pullbacks.
Waste Connections (TSX:WCN) is one of North America’s largest publicly traded waste management companies, with operations spanning over 43 U.S. states and six Canadian provinces. The business model is highly recession resistant and remains financially viable during economic downturns. This resilience is reflected in the stock as well.
It performed well in 2020 as well. The stock did follow the broader market crash and fell by over 23%, but the recovery was relatively swift. It also maintains a good growth momentum, regardless of the market conditions, making it a good pick during a market pullback. The dividends are a modest additional bonus.
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The three stocks can help your portfolio remain afloat during a pullback or bounce back faster than the rest of the market. The pullback may also have a relatively mild impact on the return potential of these stocks, especially if you hold them long enough, compared to stocks that are more vulnerable to market shifts.