Many Canadians build their retirement wealth through active and passive investing. While active investors are relatively few, the majority of investors take the “buy-and-hold” approach. For those investors, looking into factors beyond return potential in any stock they intend to buy is critical.
Most importantly, they have to look into the resilience of a particular stock to ensure that it won’t be brutalized during adverse market movements, especially close to their retirement when they might need to realize the gains.
A tech stock
Resilience and longevity aren’t something tech stocks are typically known for, especially in Canada. But like anything else, there are exceptions here as well. One of these exceptions is Descartes Systems Group (TSX:DSG), a logistics-focused tech stock that has grown consistently over the last two decades. Keep in mind that the term “consistent” is relative here as there have been temporary slumps, but the stock has always recovered, which endorses its resilience.
We can see this resilience at specific times in history, including the 2020 market crash. The stock dipped 28% but was back to its pre-crash valuation in less than four months, which was fast even for a tech stock. The stock is also financially consistent, with revenues, net income, and earnings before interest, taxes, depreciation, and amortization growing consistently for at least the last three years.
This resilience is also explained by the company’s massive footprint and reach. It has over 26,000 customers in over 160 countries. The customer profile includes retailers, distributors, major airlines, and shipping lines. The stock returned about 180% to its investors in the last five years, and if it maintains this pace, it can significantly increase your chances of retiring rich.
An information stock
Thomson Reuters (TSX:TRI) calls itself a content-driven technology company that’s also heavily influenced by artificial intelligence (AI). Even though it’s not technically a tech stock, the company’s “information” pedigree and information-oriented services and products make it more of an AI stock than many tech companies that simply integrate AI capabilities into their products/services.
There are many facets of its resilience, including its repeat/recurring business. Recurring revenues made up about 84% of the company’s total revenues (last quarter). Long-standing and consistent clientele that stick to Thomson Reuters products and services reflects that the company is staying competitive, both technology-wise and price-wise. This is remarkable considering AI disruptions in the domains in which Thomson Reuters operates, including legal.
Its performance has been relatively consistent in the last five years, and it made a swift recovery after the 2020 market crash. It gained about 117% over that period, and with dividends, the total returns were almost 145%.
Foolish takeaway
These two blue-chip stocks offer a powerful combination of reliability and return potential. For Thomson Reuters, this includes dividends as well, as the company is a long-standing Dividend Aristocrat. If held for a long enough time, the two stocks can be major contributors to your retirement nest egg and help you retire a relatively more prosperous man.
