This article first appeared on our U.S. website.
The U.S. stock market was caught up in a global sell-off Monday while the TSX was closed for Civic Day. Now, Canadian investors would be best served by checking their stock wish list. After all, corrections in the market are the best times to add funds for long-term investing!
Some investments are showing why holding them in a portfolio can help you stay calm and navigate what can be unnerving market moves. Infrastructure stocks including Brookfield Infrastructure Partners (NYSE:BIP), Brookfield Renewable Partners (NYSE:BEP) and NextEra Energy (NYSE:NEE) held their own in Monday’s market slide on U.S. exchanges.
As of 1:05 p.m. ET, Brookfield Infrastructure and Brookfield Renewable stocks were down by just 0.4% and 2% in U.S. trading, respectively. That’s after they had plunged by as much as about 6%. Utility and clean energy company NextEra’s stock was lower by 1.6%. That compares to the S&P 500’s drop of 2.7% at that time.
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Brookfield holds critical assets
Monday’s drop comes after a strong market run this year. Corrections can be healthy for markets after sharp moves higher. The trigger seemed to be from actions by the Bank of Japan and the related “carry trade” impacts. But the market slump mainly hit the highest-flying tech stocks.
Companies like Brookfield and NextEra hold critical assets that are benefiting from recent trends that should continue. Brookfield Infrastructure and Brookfield Renewable both released second-quarter earnings late last week. Those reports confirmed that the underlying businesses continue to grow.
Infrastructure reported a 10% increase in funds from operations (FFO), the preferred measure of performance for companies or partnerships that own real estate assets. That growth provides comfort for shareholders that dividend payouts can continue and even increase.
Brookfield’s portfolio of global assets includes transportation as well as utilities, energy transmission and storage, and data transmission. Last year, it also added the world’s largest owner and lessor of intermodal shipping containers to its mix. That acquisition helped its transportation segment lead growth in the second quarter.
Data centers need power
Brookfield Infrastructure also holds data center assets that its sister company helps to power. Brookfield Renewable also reported strong FFO growth of 9% year over year in its second quarter.
Management noted the growing need to supply technology companies with power for “increasingly large requirements given their growing investment in data center development to support cloud and AI [artificial intelligence] technologies.”
With Brookfield Renewable’s shares down nearly 10% year to date on the TSX, now be a good time to add a portfolio position that will help power the ongoing development of data centers needed for increased computing power.
NextEra Energy is also in a position to help power these facilities. It combines traditional utility holdings with growing renewable power supplies. It also recently reported strong quarterly results. NextEra Energy also plans to grow its dividends at a roughly 10% annually over the next two years.
Monday’s market moves show that holding at least some of these owners of critical assets can help offset sharp declines in some growth stocks at times of high volatility.
