3 Canadian Stocks to Buy if the Economy Avoids a Recession

If recession fears fade, these three TSX stocks could rebound fast as investors price in steadier spending and demand.

Amy Legate-Wolfe

Author Bio

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband.

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Favorite Investment Quote

“October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published May 6, 10:30 am EDT

| More on: ACQBBD.BMTY

Key Points

MTY can benefit if restaurant traffic stabilizes, and its cash flow and low valuation give it leverage.
AutoCanada is highly cyclical, but restructuring and cost cuts could pay off if rates ease and buyers return.
Bombardier has strong jet demand and growing services revenue, though a slowdown would hit orders after the big run.

If the economy avoids a recession, investors can afford to get a little more optimistic. That doesn’t mean chasing every risky stock with a nice story, but looking at companies tied to consumer spending, travel, industrial demand, and big-ticket purchases that can recover when confidence improves. These stocks often struggle when everyone expects a downturn, but can move quickly when the market starts pricing in better growth, steadier jobs, and lower borrowing stress.

GettyImages-1394663007 — Source: Getty Images

MTY

MTY Food Group (TSX:MTY) is a great example of this. The company owns, franchises, and operates a large portfolio of restaurant brands, including quick-service, casual dining, and takeout concepts across Canada, the United States, and international markets. It’s not a pure recession-proof business, since restaurant spending can soften when consumers feel pinched. However, if the economy avoids a hard landing, MTY could benefit from steadier traffic, better franchise confidence, and stronger demand for convenience. Meanwhile, in the last year the company continued to focus on debt reduction, cash generation, and squeezing more value from its huge brand network.

In fiscal 2025, system sales reached about $5.7 billion, while net income attributable to owners came in at $119 million. Normalized adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $291.9 million, and operating cash flow reached $184.2 million. In the first quarter of 2026, revenue came in around $267.8 million, while earnings per share (EPS) of $0.98 beat expectations. Same-store sales slipped 2.5%, which shows consumers remain careful. Still, with trailing 6 times earnings and a business that throws off cash, MTY could work well if spending stabilizes instead of cracking.

ACQ

AutoCanada (TSX:ACQ) is more cyclical, which is exactly why it could do well if recession fears fade. The company runs franchised auto dealerships across Canada and the United States, selling new and used vehicles while also offering parts, service, finance, insurance, and collision repair. Car sales depend heavily on consumer confidence, credit availability, and interest rates. That hurt the business as buyers grew cautious. Over the last year, AutoCanada closed its remaining RightRide locations, cut costs, managed inventory more tightly, and pushed ahead with restructuring efforts aimed at improving profitability.

Its recent earnings show both the risk and the opportunity. In the third quarter of 2025, revenue from continuing operations fell to $1.2 billion from $1.4 billion a year earlier. Gross profit dropped 22.2% to $187.4 million, and the company posted a net loss of $2.9 million. Yet adjusted EBITDA came in at $58.1 million, and the adjusted EBITDA margin actually improved to 4.8% as costs fell. The stock recently traded around 26 times trailing earnings. So this may not be a sleep-at-night stock. Still, if rates ease, buyers return, and management’s cost cutting sticks, AutoCanada could bounce hard.

BBD

Bombardier (TSX:BBD.B) may be the clearest “economy avoids recession” pick of the three. Bombardier stock builds business jets and has rebuilt itself around its Challenger and Global aircraft families, along with a growing services business. Over the last year, Bombardier stock kept proving its turnaround was not just a nice headline. Demand for private jets remained solid, services revenue grew, and the company’s backlog gave investors more confidence in future sales. The Global 8000 also adds a fresh product catalyst.

The numbers were strong. For 2025, Bombardier stock revenue rose 10% to US$9.6 billion, while free cash flow reached US$1.1 billion. In the first quarter of 2026, revenue rose 5% to US$1.6 billion, services revenue jumped 25% to US$617 million, and adjusted EPS hit US$1.81. Bombardier stock also raised its 2026 free cash flow outlook to more than US$1 billion and reported a backlog of US$20.3 billion. After a huge share-price run, valuation risk is real. Furthermore, a weaker economy could slow jet orders. But if growth holds up, Bombardier stock’s services, backlog, and debt reduction story still look powerful.

Bottom line

MTY, AutoCanada, and Bombardier stock each offer a different way to invest in a better-than-feared economy. And if Canada avoids recession, these stocks could have room to surprise investors who got too gloomy too soon.