Global equity markets have been volatile in recent weeks due to concerns over the United States federal shutdown and uncertainty around the Federal Reserve’s policies amid stubborn inflation. Despite this, the S&P/TSX Composite Index is up 22.4% year to date. In this environment, I believe investors should focus on building balanced portfolios by adding a mix of quality growth, defensive, and dividend-paying stocks. With that in mind, here are my top three picks.
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Shopify
Shopify (TSX: SHOP), which offers commerce solutions to businesses worldwide, is an excellent growth stock to buy right now. Earlier this month, the company reported healthy third-quarter results, with gross merchandise value (GMV) and revenue growing by 32% and 31.5%, respectively. Although its gross profits increased by 24.4%, gross margins fell by 280 basis points to 48.9% amid declines in both subscription solutions and merchant solutions.
Rising hosting expenses to support growing merchant transaction volumes and ongoing geographic expansion, along with increased AI (artificial intelligence) usage and an expanded partnership with PayPal, have put pressure on the company’s gross margins. However, the company’s operating expenses declined to 36.8% of revenue from 38.6% in the same quarter last year. Improved productivity through automation has allowed Shopify to maintain or even reduce its headcount over the past two years, contributing to this decline in expenses.
Meanwhile, net income came in at $264 million, significantly lower than the $828 million reported in the year-ago quarter. This drop was primarily driven by equity investment markups last year and $103 million in markdowns this quarter. Excluding special items, adjusted EPS was $0.34, down from $0.36 last year but in line with analysts’ expectations.
Future outlook
Looking ahead, the rising adoption of omnichannel selling continues to create strong long-term growth opportunities for Shopify. The company is also expanding its product suite with AI-powered tools and entering new international markets, further strengthening its global presence. Additionally, Shopify is enhancing its shipping and fulfillment network through partnerships with leading logistics providers, helping reduce delays and offering merchants more flexible delivery options.
However, recent weakness in the technology sector, coupled with the decline in net income, has weighed on Shopify’s stock, which has fallen more than 15% since its third-quarter earnings release. Given the company’s solid growth outlook, I believe investors could use this pullback as an opportunity to accumulate shares for attractive long-term returns.
Fortis
My second pick is Fortis (TSX: FTS), a defensive utility company that serves 3.5 million customers across Canada, the United States, and the Caribbean through its regulated asset base. With roughly 94% of its assets focused on low-risk transmission and distribution, its financial performance is largely insulated from economic cycles and market volatility. Backed by this stability, Fortis has generated an average total shareholder return of 10.5% over the past decade and has also rewarded its shareholders by increasing its dividend for 52 consecutive years. The stock currently offers a 3.5% yield.
Fortis has invested $4.2 billion in capital projects during the first three quarters and is on track to invest $5.6 billion for the whole year. It has also unveiled a new five-year, $28.8 billion capital plan extending through 2030. These investments can expand its rate base at a 7% annualized rate to $57.9 billion. As these projects support future earnings and cash-flow growth, management expects to increase dividends by 4–6% annually over the next five years, making Fortis an attractive long-term buy.
Enbridge
Third on my list is Enbridge (TSX: ENB), a top dividend stock supported by stable cash flows, consistent dividend growth, and an attractive yield. The Calgary-based energy infrastructure giant generates about 98% of its adjusted EBITDA from regulated assets or long-term take-or-pay contracts. It also has limited exposure to commodity price volatility and protects roughly 80% of its adjusted EBITDA from inflation through indexation.
These predictable cash flows have allowed Enbridge to pay dividends for 70 consecutive years and increase them at a 9% annualized rate since 1995. The energy infrastructure company currently offers a forward yield of 5.5%. The company is growing its asset base by investing $9–$10 billion annually in capital projects. Amid these growth initiatives, management expects to reward its shareholders by returning $40–$45 billion over the next five years, reinforcing Enbridge as an attractive long-term buy.
