2 Defensive Stocks for Low-Risk Investors in February 2024

Protect your investment capital from market volatility by injecting stability through these low-risk TSX stocks in your self-directed investment portfolio.

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The stock market’s volatility does not seem to be letting up right now. The S&P/TSX Composite Index, the primary benchmark indicator for the Canadian equity market, has been on a roller coaster within the first few weeks of 2024.

In an increasingly difficult-to-predict macro environment, investors can go for two options. They can either bet on a soft landing for the economy and prep for a sustained bull run. Or, they might want to reposition their portfolios with defensive assets to prepare for a significant downturn.

The jury is still out on which side the coin will land on. Whether in for a soft landing or a devastating bear market, a conservative approach to investing in a volatile market never hurts. If you want to increase the defensive qualities of your portfolio to prepare for a potentially rough ride in the coming weeks, here are two stocks I’d consider right now.

Fortis

Fortis (TSX:FTS) is a staple holding in many Canadian stock market investor portfolios. The $25.91 billion market capitalization utility holdings company is a giant in Canada’s utility industry. Fortis owns and operates several natural gas and electricity utility businesses in Canada, the U.S., and the Caribbean, providing these essential services to over 3.4 million customers.

In tough economic conditions, consumers cut discretionary spending to save costs. Due to the nature of the services it provides, this utility company does not need to worry about macroeconomic jitters impacting its cash flows.

Fortis also enjoys the defensive moat of long-term contracted assets, generating almost its entire revenue in highly rate-regulated markets. The pressures of higher key interest rates have dragged its share prices for several months.

As of this writing, Fortis stock trades for $53.04 per share, down by 14.45% from its 52-week high. The Canadian Dividend Aristocrat, with a dividend-growth streak of over 50 years, pays its investors their dividends at a juicy 4.45% dividend yield.

Dollarama

Dollarama (TSX:DOL) is a $28.14 billion market capitalization Montreal-headquartered dollar store retail chain. The company is the largest discount retailer in Canada, known for its solid fundamentals and strong growth trajectory through various market conditions.

The company primarily sells household goods and essentials like cleaning products, plastic and paper items, children’s toys, beauty products, seasonal goods, and more.

When consumers cut discretionary spending, companies like Dollarama offer more affordable alternatives. With a store network spanning across Canada, Dollarama enjoys a substantial degree of protection against market volatility due to its business model.

As of this writing, Dollarama stock trades for $100.96 per share, up by 35.77% from its 52-week low.

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Foolish takeaway

If you have a more growth-focused portfolio, the past few weeks of investing might have hurt the value of your investments due to the volatility. It remains to be seen whether this uncertainty will lead to a bear market or make way for soaring share prices across the board. Regardless, playing it safe by shoring up your defences is never a bad idea.

Due to the resilient nature and strength of the respective underlying businesses, Fortis stock and Dollarama stock can be excellent additions to your portfolio for this purpose.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

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