There are several different investment strategies when it comes to surviving market downturns with minimal damage. Some of them are connected to the right investment behaviour — i.e., not panicking and selling during a slump, while others lean towards the right preparation, like investing in stocks that are better equipped to survive a market downturn.
The choices become a bit more limited if you want to stick to growth stock, but there are some great options, including Metro (TSX: MRU).
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The company
Metro is one of the largest grocery and pharmacy retail chains in Canada, with significant regional reach. They also have the second-highest sales penetration in Canada when it comes to food products. The pharmacy business is thriving as well.
As a local company, Metro doesn’t offer the geographic diversity that another retail chain in Canada offers, but the loyalty of the local consumer base is enough to offset that. The business model is also resilient against weak economies and other challenging scenarios because of its focus on necessities: food and medicine.
The company is also making its operations leaner, reducing overhead costs. This includes promoting self-checkouts and making the supply chain more efficient. It’s also expanding its e-commerce portfolio of services and reach.
The stock
Metro has been a relatively healthy growth stock since its inception. It has returned over 211% to its investors in the last 10 years through price appreciation alone, which, annualized, comes to about 21%, making it a modest growth stock. But anything you lack in the growth pace is counterbalanced by the consistency of its growth and its resilience in weak economic conditions.
The stock only experienced a slight dip during the 2020 market crash and recovered in less than a month. That’s not to say that it’s immune to all types of market downturns, but considering its performance in COVID and the business model that relies upon necessities, which people don’t stop spending money on, even in weak economies, make it a strong buy and hold option for weak markets.
The dividends are another reason to consider this stock, even though the yield is usually quite low (1.7% at the time of writing this).
But it has a compelling dividend history, with 28 years of consecutive growth. If we take into account the rock-solid payout ratios that have been this way for at least 10 years, Metro becomes one of the most reliable growth stocks in Canada that you can buy for its growth potential.
Foolish takeaway
Metro is a healthy long-term investment that is currently quite attractively valued. It’s the type of stock you can buy just as confidently in a bull market as you would in a bear market, especially if you are planning on holding it long term, as the discount doesn’t define its appeal.
