Bull Market Buys: 1 Magnificent Stock to Own for the Long Run

This one cyclical stock could be the best long-term option for investors, especially while shares still offer a steal of a deal.

| More on:
railroad

Image source: Getty Images

Canadian investors reading this might be a bit confused. After all, I would not necessarily say we’re in a bull market quite yet. After all, a bull market occurs during a period of rising asset prices, investor optimism, and overall positive sentiment. I wouldn’t necessarily say that characterizes the fluctuating market we currently have – even as the market flirts with all-time highs on the TSX today.

Yet for investors, this means there are still deals to be had. Especially among companies that tend to fall during bear markets, only to rise once more during a bull market. So here are some stocks to consider for when we finally enter a bull market once more.

Cyclical stocks

When it comes to investing during a bear market, cyclical stocks tend to offer a great option. Companies in sectors such as automotive, construction, and manufacturing often struggle during a bear market. This is when consumer spending and business investments decline.

However, these stocks tend to thrive during a bull market when economic activity picks up. This leads to increased demand for their products and services. Historically, companies in cyclical industries have provided opportunities for long-term growth, especially when purchased at favourable valuations during economic downturns.

A stock to consider

A strong option in this case would be Canadian National Railway (TSX:CNR). CNR stock is one of the largest and most established railroad companies in North America. It can be considered a strong long-term investment choice, even during a bear market. 

Railroad companies like CNR have historically been viewed as defensive investments because they provide essential transportation services for various industries. These include commodities, consumer goods, and automotive products. During economic downturns, demand for these essential goods may decline. But it doesn’t disappear entirely, providing a degree of resilience to CNR stock’s revenue streams compared to more cyclical industries.

CNR stock also benefits from significant barriers to entry in the railroad industry, including high infrastructure costs, regulatory hurdles, and established network effects. These barriers create a competitive advantage for CNR stock. This allows it to maintain pricing power and market share over the long term, even during challenging economic conditions.

Strong choice, long term

CNR stock is known for its operational efficiency and cost-effective transportation solutions. By continuously investing in technology, infrastructure upgrades, and process improvements, CNR enhances its competitive position and profitability, mitigating the impact of economic downturns on its bottom line.

The company also has a track record of consistently increasing its dividend payout to shareholders. This demonstrates its commitment to returning value to investors over the long term. Even during bear markets, CNR’s stable cash flows and strong financial position enable it to maintain and potentially increase dividend payments, providing income and stability to investors.

Finally, despite short-term economic headwinds, CNR stands to benefit from long-term trends such as population growth, urbanization, and international trade. As global economies recover from bear markets and demand for goods and commodities rebounds, CNR is well-positioned to capitalize on increased freight volumes and transportation demand, driving long-term growth in its business and stock price.

Bottom line

CNR stock continues to be one of the best options to buy in this bear market, and to hold for a long-term bull market. The company is up just 7% in the last year, and trades at a fairly valued 20 times earnings. With a strong balance sheet and 1.96% dividend yield, CNR stock certainly looks like a strong buy. And one investors can hold for decades to come.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Increasing yield
Dividend Stocks

2 High-Yield Dividend Stocks to Buy as They Bounce

These top dividend stocks still look cheap.

Read more »

ETF chart stocks
Dividend Stocks

The Best Canadian ETFs $100 Can Buy on the TSX Today

These three ETFs are the perfect options for investors looking for growth, income, and a base to hold long term.

Read more »

money cash dividends
Dividend Stocks

TFSA Pension: How to Earn $4,750 Per Year in Tax-Free Income

Here's why the TFSA should be an integral part of your retirement savings strategy.

Read more »

Man considering whether to sell or buy
Dividend Stocks

TELUS Stock: Buy, Sell, or Hold?

TELUS (TSX:T) stock has seen operational improvements but still remains down on a year-over-year basis. So, is it worth it?

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

Retirees: 2 Top TSX Dividend Stocks That Still Look Oversold

These great Canadian dividend stocks now offer high yields.

Read more »

edit Balloon shaped as a heart
Dividend Stocks

2 Dirt-Cheap Retail Stocks Fit for Dividend Lovers

Metro (TSX:MRU) and another great retailer that could be ripe for buying in May 2024 for the next three years.

Read more »

Paper airplanes flying on blue sky with form of growing graph
Dividend Stocks

Outperform the TSX With This Lucrative Dividend Stock

Hydro One is a dividend stock that should beat the TSX index due to a widening earnings base and rising…

Read more »

Profit dial turned up to maximum
Dividend Stocks

RRSP Investors: 2 Great Dividend Stocks to Buy for Total Returns

Here are a couple of great dividend stocks that should deliver decent long-term returns for RRSP accounts.

Read more »