It’s easy to forget about the defensive portion of one’s TFSA or RRSP portfolio. Stocks are booming, but it’s times like these – when it seems like stocks can only climb – that it can pay dividends to consider rebalancing and adding to one’s defences before the next big market spill.
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Waste Connections: A defensive grower that’s freshly corrected – time to buy?
Not every Canadian stock is joining in on the latest bullish surge in the TSX Index. In fact, there are some really high-quality stocks out there that are taking a breather, with some of the names down big over the past month. Waste Connections (TSX:WCN) is one of the names down 6% in the past month, while the TSX Index is up 6%.
Indeed, it’s a lowly correlated stock with a 0.6 beta and considered by some as a great place to hide when the economic landscape gets a bit rockier. Though shares of WCN do stand out as less than appealing in the face of a booming bull market, given its defensive characteristics and “boring” nature relative to some of the growth darlings that have been blasting off, I do see shares as a fantastic addition to the portfolios that may be a bit short on defence.
Indeed, you’ll feel the most upward force from the bull market if you’re heavy on the tech and consumer discretionary stocks. However, in the grander scheme of things, I do think that defence can help win championships. And while I do think there are far better places to be as the bull market goes into full swing, investors should also remember that a bear market will, in due time, arrive.
Don’t seek to “get out” before the bear arrives; prepare to invest through the next bear market
And instead of seeking to “get out,” one should look to “invest through” the next bear market with the help of stellar wide-moat defensive growers like Waste Connections. Indeed, the lowest price to play defence tends to be offered when most others have more of a risk-on appetite. And while I wouldn’t rotate out of tech and into the waste collectors in utilities, I do think that watching the forgotten, steady risk-off plays could make sense on weakness.
At the time of this writing, WCN stock is down more than 15% from its April 2025 all-time high. Sure, defence is out of fashion these days, and the firm is experiencing more than its fair share of headwinds. However, I wouldn’t ignore the longer-term opportunity at hand, which, I think, will not be as heavily impacted by the next economic contraction or bear market.
Most of the headwinds facing Waste Connection seem more transitory in nature. With high barriers to entry protecting its cash flows and the ability to increase prices, I’d argue that Waste Connections is one of the best long-term ways to preserve wealth and shelter it from inflation.
The bottom line
Indeed, Waste Connections rarely has quarterly fumbles, but when it happens, investors should take notice and look to start doing some buying, especially if one’s TFSA is a bit short on the defensives. Going into the next year, I’d look for M&A and margin-driving efforts to help jolt growth and fuel a turn in the stock.
