Market dips can make investors feel a bit uneasy. However, these times can also present some interesting opportunities. This is especially true for companies that rely on consumers spending money. The consumer discretionary sector includes things people buy that are not essential. Interestingly, this sector has often held up reasonably well when the market gets a little shaky.
Over the past three years, companies in this area have seen their earnings grow by an average of 3.4% each year. Revenues have also increased by about 8.9% annually. In fact, according to Statistics Canada, household final consumption expenditure in 2023 was $1,181.87 billion, an increase from $1,162.65 billion in 2022. This shows that overall consumer spending in Canada has been on an upward trend. But which stocks stand out as the best options during this market dip?
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Dollarama
One Canadian company that stands out is Dollarama (TSX: DOL). It is a major retailer in Canada that sells a wide variety of everyday items at low, fixed prices. Dollarama tends to do well when people are more careful with their budgets. This often happens during slower economic periods and market dips.
In its most recent earnings report for the third quarter of fiscal year 2024, Dollarama announced a 14% jump in sales, reaching $1.29 billion. Sales in stores open for more than a year also increased by a healthy 10.8%. The company’s operating income went up by 18.7% to $293.1 million. As of writing, Dollarama has a market capitalization of over $42 billion. This all shows that Dollarama can still attract customers even when money is a bit tighter.
Restaurant Brands
Another significant player is Restaurant Brands International (TSX: QSR). This company owns popular fast-food chains like Tim Hortons, Burger King, and Popeyes. The restaurant industry can face some challenges, but Restaurant Brands has shown it can adapt.
In the fourth quarter of 2024, the company reported a 9.6% increase in its total sales across all its restaurants, amounting to US$9.8 billion. Notably, Tim Hortons in Canada saw its comparable sales grow by 11.3%. Restaurant Brands International currently has a market capitalization of over $45 billion. This strong performance indicates that the company’s brands are still popular with consumers.
Magna
Magna International (TSX: MG) is another Canadian company worth considering, though carefully. It is a big global supplier in the automotive industry. While the car industry can have its ups and downs, Magna’s diverse range of products and its presence around the world help it weather market changes.
In the fourth quarter of 2024, Magna’s sales reached US$10.57 billion, a 5% increase compared to the same time the year before. The company also focuses on new technologies, especially in electric and self-driving vehicles. Magna International has a market capitalization of over $13 billion. This could all position it for growth in the future, even if the current market has some uncertainty.
Bottom line
Investing when the market is down can be a smart move, but it is important to be careful. Companies like Dollarama, Restaurant Brands International, and Magna International have all demonstrated that they can be resilient and adapt to changing conditions. This makes them interesting options for investors who are looking at how consumer spending might play out during the current market dip.
