Investors are facing a slew of market stressors. From the pandemic to the U.S. election, 2020 is shaping up to be a tire fire of a year. But that is not to say that stocks are off limits. Far from it. Here are seven of the best recession-resistant names.
Diversification is key to defensiveness
Alimentation Couche-Tard is no doubt familiar to millions of Canadians in one form another. From its winking “night-owl” logo to Circle K convenience stores, this is a well-established market leading brand. But the company is also very strongly diversified across geographical regions, extending beyond North America to Europe, Asia, Oceania, and Africa.
Loblaw is a strongly diversified umbrella of big names in Canadian retail. Investors should weigh whether they would rather buy this name or Alimentation Couche-Tard, though, since holding both could carry the risk of overexposure. Loblaw pays a 1.8% yield, considerably richer than Alimentation’s 0.6% yield. In terms of performance, Alimentation is up 9% year over year, however, beating Loblaw’s 0.7% loss.
Then again, investors may wish to plump for that other low-risk asset: gold. A stand-out name in this space, Newmont mixes good value for money, a moderate dividend yield, gold growth, and safety all in one stock. A conservative estimate would see investors enjoy a 68% return on investment within a year. Going long, shareholders have a healthy balance sheet and a 1.6% dividend yield worthy of a “buy forever” portfolio.
Energy investing is not traditionally a growth area, but was at least considered moderately defensive — until this year, that is. Lower energy demand means lower electricity prices in 2020, while oil is also facing a barrage of headwinds. Green energy is ascendant, though, packing growth and defence. Northland Power is a strongly diversified clean energy stock tailor-made for the renewables segment of a stock portfolio.
Consumer staples stocks are strongly recession resistant
Pizza Pizza — the stock so good, they named it twice. Fast food has proven stubbornly resistant to the pandemic. As a go-to comfort food, pizza is both a “sin” commodity as well as a defensive consumer staples play. Both of these asset types can thrive during a recession. A forward annual dividend yield of 6.8% makes for a nice slice of passive income in a recession-resistant industry.
Restaurant Brands International follows on from the Pizza Pizza theme. Again, investors will have to balance these two names or risk overexposing a stock portfolio to fast food. Restaurant Brands may be the better sleep-easy pick, given its spread of assets. The Tim Hortons owner is on sale after a quarterly drop in profits. A 2.8% yield is suitably juicy for this space, though, adding to an overall buy thesis.
Scotiabank mixes the strength of a Big Five banker with growth potential in the Pacific Alliance, plus exposure to a possible housing boom. Matched with Northland Power, moderate growth investors have a mix of Scotiabank’s 6.2% dividend with Northland’s 3.2% yield, plus the high-growth thesis of green power. This would be a strongly diversified power play with a mix of growth and defensive qualities.
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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of PIZZA PIZZA ROYALTY CORP. The Motley Fool recommends BANK OF NOVA SCOTIA and RESTAURANT BRANDS INTERNATIONAL INC.