We are one quarter into 2026, and already, this year’s market is shaping up to be a bumpy one. Driven by the outbreak of a war in Iran, global markets have been more volatile than average, with the S&P 500 dropping more than 4% several times in a single trading day. It has been a nail-biting experience.
Bear markets represent great opportunities to make money, if you have “dry powder” lying around, and the stomach to buy falling knives. By buying during bear markets, people like Warren Buffett have made massive fortunes. With that being said, the opportunity to buy low is little consolation if you were already fully invested at the top and had 90% of your savings wiped out. For working and middle class investors, that kind of outcome is very much possible.
So, it is a good idea to have some assets in your portfolio that are more resistant to market turbulence than average. Some classic examples include treasuries, precious metals, and real estate. These often break out during bear markets for stocks. Surprisingly, certain types of stocks also make the cut. Historically, utilities, discount retailers, and grocery stores have tended to break out during recessions. In this article, I’ll explore two such stocks that could break out this year.
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Fortis
Fortis Inc (TSX: FTS) is a Canadian utility stock that has a long history of outperforming during bear markets. As a regulated utility company, it has an established, “locked in” source of recurring revenue: homeowners’ utility bills. Utilities, such as heat, light and water, are among the most essential services in an average person’s life. Most would prefer to sell their car rather than opt out of heating and water. For this reason, utility revenue is remarkably stable during recessions, declining only slightly compared to the pre-recession period.
Most utilities enjoy the advantages above, but Fortis has performed better than the average TSX utility, outperforming the TSX utilities sub-index over many decades.
There are a few reasons for Fortis’ superior sector relative performance. First, the company does not “push it” with dividends, usually keeping its payout ratio well under 100%. Second, the company invests in growth, having bought many smaller utilities back in the 1980s and 1990s, and is doing a major infrastructure upgrade project today. Third and finally, Fortis is generally well run, with an experienced and competent management team. For these reasons, Fortis shareholders have enjoyed good long-term performance and excellent relative performance during bear markets.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX: ATD) is a Canadian convenience store company that operates gas stations. As a result of this dual strategy, Couche-Tard is essentially two businesses hidden within one: a retail company and an energy company. The company treats these two segments separately in its financial statements. The retail business is referred to as “merchandise and services,” while the fuel business is referred to as “road transportation fuel.”
Historically, ATD stock has fared comparatively well during bear markets. One of the reasons for this is the fact that ATD sells alcohol, cigarettes and lottery tickets. These “vice products” tend to sell well when times are tough. Second, the company has taken a disciplined approach to growth over the years, re-investing its own earnings into growth rather than borrowing heavily. The end result has been steady growth with a minimal amount of debt. It’s a winning combination that has treated shareholders well over the years: ATD stock has outperformed the TSX more than tenfold over the last 20 years!
