With an increasingly difficult-to-predict macro backdrop, investors have two choices. They can either bet on a soft landing and a continuation of the bull market for the coming years. Or there’s always the option of rotating into more defensive stocks to gain exposure to sectors that can weather a potential incoming economic storm.
While the jury remains out on whether we’ll see a soft landing or not, being conservative can pay off. For those looking to tilt their portfolio in a more defensive direction in 2024, here are three stocks I’d consider right now.
Dollarama
Dollarama (TSX:DOL) is a Canada-based discount retailer renowned for its strong fundamentals and growth trajectory. The company deals primarily in household goods such as beauty products, seasonal merchandise, cleaning products, plastic and paper items, children’s toys, and more. It also deals with pet food, confectionery, art and craft supplies, and glassware sets. Most of these items are priced at a few dollars or less.
Dollarama has a wide network of stores across metro cities, medium-sized towns, and cities or small towns across Canada. Its stores are present in cities like Ontario, Saskatchewan, British Columbia, Ontario, New Brunswick, and Manitoba, etc.
The stock is comparatively immune to market volatility because of its defensive business model. Previously, it outperformed industry returns with a significant amount of return on equity (ROI) for investors. Over the last five years, the stock grew at an annual rate of 24%, which is a total ROI of 196% since its listing date.
The core competence is not just offering products at lower prices in smaller quantities but also aiming to offer exceptional value across any quantities, making them unique from other industry players.
Canadian National Railway Company
Canadian National Railway Company (TSX:CNR) is a company that is primarily in the business of freight transportation. Its services include freight forwarding, trucking, warehousing and distribution services, and intermodal services. It is operational between a network of tracks running between Mid-America and Canada, linking the Gulf of Mexico with the Atlantic and Pacific Oceans.
The company has grown at an impressive rate over the past five years, and the stock has coincidentally surged nearly 60%. Hence, if you are looking forward to investing in a stock with stable and steady growth, Canadian National Railway can be an appropriate choice for the near term.
Fortis
Fortis (TSX:FTS), is a Canada-based multinational utilities player. The company has smaller stakes in several Caribbean and electricity generation utilities, catering to more than 3.4 million customers. Recently, the company has declared a dividend of $0.59 per common share and has continued its impressive streak of dividend hikes. Importantly, Fortis has now raised its dividend annually for five consecutive decades, putting this stock in rarified air for income investors.
Fortis appears to be cheap, trading at 17.8 times trailing earnings at the time of writing. Given the cash flow predictability this company provides, it’s among the leading value stocks I think investors should consider at this stage in the market cycle.
