Finding stocks or other assets that can provide portfolio protection in 2026 is one of the key strategies I’m after. Indeed, after three years of double-digit returns in equity markets, there’s good reason for some investors to be uncertain about where valuations could head in 2026 and beyond.
Accordingly, for investors looking to put together an all-weather portfolio that can withstand some storms on the horizon, there are certain stocks I’d key in on first. These three are among my top picks in terms of TSX-traded stocks with downside protection right now.
Here’s why these are the three Canadian companies I’d focus on first for a more defensive tilt in 2026 and beyond.
Fortis
The reality about Fortis’ (TSX:FTS) business model, or that of any other major utility giant for that matter, is that we all need to keep the lights and heat on. Indeed, the cash flow profile of a company like Fortis is unique in how robust it is, and that’s an expectation I have for decades to come.
Fortis has relied on its extremely robust cash flow growth profile to consistently raise dividends each and every year. In this regard, Fortis remains one of the top dividend stocks I continue to pound the table on. Now, 52 consecutive years of dividend hikes will do that.
I’d expect to see even more robust EPS growth in the quarters to come, particularly if the AI buildout continues as expected and electricity demand really takes off. With strong geographic positioning in a lucrative utility sector, Fortis remains a top pick of mine for long-term investors looking to outperform the markets this year.
Restaurant Brands
Another top defensive stock I continue to tout as a way to play a weakening consumer in 2026 and beyond is Restaurant Brands (TSX:QSR).
A purveyor of some of the best value banners in the world of fast food giants, Restaurant Brands has seen muted growth in recent years, as most growth investors flocked to higher-growth stocks in the technology world. Whether that’s AI stocks or other high-growth trends, other companies have clearly outperformed this quick service restaurant behemoth.
That said, if we do encounter a situation where unemployment and inflation rise faster than wage growth, I do think the amount of trade-down we’ll see in the dining world will pick up. Such trends should benefit companies like Restaurant Brands that provide among the most robust value offerings in this sector.
With solid revenue and earnings growth in the past quarter underpinning a valuation that hasn’t been this cheap in years, QSR stock remains a top pick of mine right now.
Manulife Financial
Finally, we come to insurance and wealth management giant Manulife Financial (TSX:MFC), one of the better-performing stocks in its sector in recent years.
Declining interest rates and a steepening yield curve have a great deal to do with the returns Manulife has provided investors with over the past two years. As the company’s long-duration asset portfolio (mainly consisting of long-term debt and fixed income securities) has been locked in at higher yields, this is a company that should benefit from a re-rating lower of these asset classes over time. That’s my base case, at least.
Aside from this core catalyst, I think Manulife’s 3.4% dividend yield and reasonable valuation multiple provide a floor underneath this stock price. So, while other stocks in the market may have plenty of room to fall, there’s a reasonable expectation that MFC stock may not be as fazed by such trends.
These are the kinds of stocks I think are worth owning in what could be a more tumultuous investing environment than we’ve seen in some time.
