If you haven’t put your Tax-Free Savings Account (TFSA) contributions to work in a while, it may be time to start thinking about doing some buying while valuations on some names are still modest. For example, if your 2024 and 2025 TFSA contributions (let’s say you’ve got $14,000) are currently parked in cash, now seems like a good time to reconsider your asset-allocation strategy as the TSX Index looks to beat the S&P 500 for the full year. Indeed, it’s quite rare to witness the Canadian stock market outpace the great S&P 500. But if we haven’t yet seen the last of the high-tech volatility and tariff uncertainties, perhaps it’s not too far-fetched to imagine the TSX Index’s relatively hot run continuing in the second half of the year. As it stands, the TSX Index is up just shy of 6% year to date. That’s quite a respectable gain!
Though not obscene by any stretch of the imagination. Meanwhile, the S&P 500 is up more than 2% after having two months to heal from the damage dealt during the March-April sell-off, primarily driven by tariff fears. As the S&P 500 pushes higher into the green, the big question for Canadian investors is whether the TSX Index can pick up traction as its momentum begins to lose steam.
In this piece, we’ll take a look at a name that could help Canadian investors form a more balanced portfolio, one that can hold its own relatively well once the next correction rolls around. While a more growth-focused portfolio may be more appropriate for young investors who can handle the wild ups and downs, I think that there are strategic names out there that can provide much of the growth (and capital appreciation) without all the amplified damage that tends to strike when investors panic sell and run to the hills.
Waste Connections
Waste Connections (TSX:WCN) stock is a less-volatile way to do well over time. The stock boasts a 0.62 beta, which implies a less correlated ride to the market. Over the past five years, shares have shot up 111%. And while there have been bumps along the way, the dips haven’t been due to broad market fears. During the Liberation Day shocker, WCN stock still took a hit, but far less so than the S&P 500. More recently, shares dipped slightly below their April depths for no real good reason. Indeed, Waste Connections’s margins appear healthy and poised to expand further, regardless of what ultimately happens to the Canadian economy.
Perhaps the latest pullback (of around 8%) has more to do with the stretched multiple than anything else. The moat is as wide as ever, and the firm’s fundamentals continue to be robust in the face of tariffs and macro headwinds. At the time of writing, shares go for 26.6 times forward price to earnings (P/E), which isn’t all too pricey, especially if you’re looking for a name that can fare well in most market conditions.
As the firm flexes its pricing power amid continued inflation, look for shares to continue performing for investors. At the end of the day, Waste Connections is a proven performer that I’d rather own than cash as a part of a balanced TFSA.
