The Canadian stock market has started showing signs of life again. Between April 8 and May 9, 2025, the S&P/TSX Composite Index gained 12.67%. The uptick in the benchmark index suggests bull market conditions. Despite the recent rally in the broader market, it might be better to assume that the market will continue to be volatile in the foreseeable future.
When markets are volatile, investing in growth stocks might not be the best idea for someone with a small appetite for risk. If you have a well-balanced portfolio to mitigate losses, that can still work. For those who would want to play it a little safer but still inject some growth potential into their self-directed portfolios, it might be better to focus on fundamentally strong companies.
Considering this, here are two TSX stocks I would invest in if I had $4,200 to beat the rest of the market.
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Another man’s waste…
They say that another man’s waste can be another man’s treasure. This might just be true in the case of Waste Connections (TSX: WCN) stock. Waste Connections is a $70.28 billion market-cap company that has become the continent’s third-largest integrated provider of traditional solid waste and recycling services. It offers non-hazardous waste collection and disposal services, primarily focusing on the rural and secondary markets.
Investing in the waste disposal industry might not seem as exciting as betting on the success of up-and-coming tech companies. However, it can be a much safer way to use your investment capital. WCN stock has a business model that generates free cash flows due to lower customer turnover. The demand for its services only keeps increasing, and the company’s revenues allow it to comfortably fund more acquisitions to expand operations.
As of this writing, WCN stock trades for $272.07 per share and offers quarterly payouts at a meagre 0.64% dividend yield.
An energy transmission company
Hydro One (TSX: H) is another company providing an essential service with solid demand that can only grow in the coming years. I would even argue that it is one of the best investments to consider on the TSX if you want to generate strong returns without taking on too much risk. Hydro One is a 30.60 billion market-cap company headquartered in Toronto that operates a regulated energy transmission and distribution business in Ontario.
One of the reasons it is an attractive investment to consider is the lower-risk business model. Hydro One doesn’t engage in generating power, which would entail heavy debt loads to contend with. Instead, the company focuses on transmitting and distributing electricity through its infrastructure. This also eliminates the risk of commodity price fluctuations that would otherwise affect cash flows. Since it operates in a regulated market, it enjoys another layer of protection through stable and steady earnings with predictable cash flows.
As of this writing, Hydro One stock trades for $51.05 per share and boasts a 2.61% annualized dividend yield that it pays out on a quarterly schedule.
Foolish takeaway
Investing in companies that perform well right now and have the potential to drive more growth for shareholders for years to come can be an excellent way to put your money to work in the market.
Remember, stock market investing is inherently risky, and even the most reliable stocks can experience downturns. The key to minimizing the chances of losses is to do your homework and invest in companies with the best potential to deliver solid long-term returns. Against this backdrop, WCN stock and H stock can be good holdings to consider.
