The market is unpredictable. It is futile to time the market because not every time factor will play in your favour. While it is true that buying the dip and selling the rally can get you good returns, you may not have the liquidity when the stock dips. And if you keep waiting for the dip, you might see that the stock has only rallied.
Three stocks you can buy with confidence in any market condition
Instead of waiting for the right time and missing the opportunity in the wait, grab onto some stocks you are confident will give returns in any market condition.
Constellation Software
Constellation Software (TSX:CSU) has stood the test of time and perfected its business model of acquiring niche software companies with sticky cash flows. Although it falls under the tech stock, it is an umbrella company whose business is acquiring companies and compounding returns. The way compounding works is that it keeps investing its cash flows to acquire more cash flows and grow the size of its portfolio companies.
In the second quarter, Constellation increased its revenue by 21% while the net income attributable to common shareholders increased 71% year over year to US$177 million. The company has seen organic revenue growth of 3-4% and average earnings per share (EPS) growth of 13% in the last five years. On the valuation front, the stock looks expensive, trading at 27 times its book value per share. However, it is a growth stock that has delivered double-digit EPS growth in nine out of 14 years.
At $4,261 per share, it might be an expensive stock to buy, but buying even one share can double your money in three to five years.
Enbridge stock
99% of oil produced in Canada is exported to the United States through pipelines. Oil exports are a significant contributor to the economy, making pipeline company Enbridge (TSX:ENB) strategically important for the country. Enbridge has built the largest pipeline infrastructure in North America over the last 69 years. It has a low-risk business model. It raises funds from debt and equity to build pipelines. It then uses the toll money collected from transmitting oil and gas to repay the debt, maintain pipelines, and build new ones. The remaining cash becomes the distributable cash flow, of which it pays 60-70% as dividends to shareholders.
Over the years, several of its projects have been paid off. The company maintains a strict debt-to-equity level and invests capital to acquire companies and build new pipelines and energy projects. This disciplined capital investment has helped Enbridge sustain the 2009 Financial crisis, the 2014 oil crisis, and the 2020 pandemic. The stock trades in the range of $45-$55. You can consider investing in it whenever it trades at or below $50 and lock in a 7% dividend yield. The company has also been growing its dividend per share for 29 consecutive years, allowing you to beat inflation.
Royal Bank of Canada
Royal Bank of Canada (TSX:RY) is among the Big Six banks of Canada. With over 150 years in banking services, the bank has been through the World War and the 1980s recession and changes in banking regulation. It has upgraded itself to modern banking while maintaining a tight risk profile. Apart from deposits and lending, the bank also offers wealth management services, which are influenced by the stock market’s performance.
Royal Bank of Canada has acquired HSBC Canada and expects to realize $740 million in cost synergies. With a market cap of $218 billion, it is the largest stock trading on the TSX. It is one of the safest stocks to buy and get quarterly dividends. However, the stock is unlikely to generate wealth because of its slow growth in stock price.
Investor takeaway
While you can invest in risky assets and stocks, ensure you hold some fundamental stocks like the above three in your core portfolio to give it a strong foundation amidst market volatility.
