One of the best things about the stock market is all the choices that investors have. Not only can you buy tonnes of stocks of companies that you like or understand, but with so much choice investors can better diversify their holdings to mitigate risk. So the reasons to buy one stock right now will almost certainly be different from another.
For example, you may buy a utility stock to help generate passive income and stabilize your portfolio since utility stocks are some of the lowest-volatility businesses you can buy. At the same time, you might also buy a higher-risk growth stock too, that could provide your portfolio with years of elevated growth.
However, while diversification is important and investors have a tonne of choice when investing in the stock market, there are some stocks that can offer the best of both worlds, with defensive operations alongside substantial long-term growth potential.
That’s why, in this highly uncertain environment, if I could buy only one stock right now, it would have to be Brookfield Infrastructure Partners (TSX:BIP.UN).
Is now the time for safe defensive stocks or high-potential growth stocks?
Having a diversified portfolio is always essential, especially in environments such as the one we find ourselves in today.
This year many expect the economy to start recovering. At the same time, though, it likely wouldn’t shock anyone if the economy was to continue to worsen and go into a recession.
So, deciding whether to buy growth stocks for a market rebound or defensive stocks for an impending recession can be an extremely difficult task. That’s why it’s essential to own both. That’s also why Brookfield Infrastructure is one of the best stocks to buy right now.
Brookfield offers investors both defensive operations and long-term growth potential, making it one of the most appealing stocks to buy in the current environment.
Its core operations and the assets it owns — as its name suggests — are all highly defensive and ideal to own through a recession. With a portfolio of essential infrastructure assets like railroads, telecom towers, utilities, pipelines and much more, plus with these operations diversified all over the world, Brookfield’s operations should continue to be highly recession-resistant.
Furthermore, while this diversification of assets all over the world is essential to mitigate risk, Brookfield’s global reach also gives it more opportunity to find new investments it believes are undervalued.
This is precisely how Brookfield operates and why it’s one of the best stocks to buy right now. Although its core operations are defensive, the stock is constantly selling off older, more mature assets and recycling that cash into new opportunities in order to constantly grow the cash flow its portfolio generates.
How much growth potential does Brookfield have?
Due to Brookfield’s operations and strategy of selling off older assets and reinvesting in new assets, how the stock might perform year to year is difficult to predict. Instead, the company focuses on its long-term growth potential as some years it may not make many acquisitions while other years it may significantly turn over its portfolio.
It’s this growth strategy that has allowed Brookfield’s revenue to more than triple in just the last five years, not to mention its funds from operations per share have consistently increased every year for more than a decade and at a compounded annual growth rate of more than 10.7% through that stretch.
Another noteworthy fact about Brookfield is that it’s not just growing its cash flow to reinvest in the business. It’s also consistently increasing the distribution it pays to investors.
In fact, Brookfield’s stated goal is to increase its distribution between 5% and 9% annually. Today, with the stock trading roughly 20% off its 52-week high, Brookfield’s yield looks attractive at about 5%.
That’s why, in this highly uncertain environment, if I could buy just one stock, Brookfield Infrastructure with its reliable defensive assets, attractive yield and impressive long-term growth potential seems like it would be the ideal stock to add to your portfolio.