Market Crash Protection: 2 Defensive Stocks

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Market Crash Protection: 2 Defensive Stocks's Profile


While the stock market has slowly been recovering as of late, another market crash certainly isn’t out of the question. Despite large parts of the economy re-opening, there are still concerns.

For one, there isn’t yet a vaccine available for COVID-19, and there may not be for some time. Plus, recent tariff-related tensions between the U.S. and Canada mean there’s reason to be cautious with the market.

Now, some long-term investors might not be overly concerned with a short-term market crash or market turbulence. However, investors with a medium- or short-term investment horizon should be more defensive.

Today, we’ll look at two defensive TSX stocks that offer market crash protection and resiliency to investors.

Loblaw

Loblaw (TSX:L) is Canada’s largest grocery retailer and also offers customers pharmaceutical and banking services.

When it comes to defensive stocks, Loblaw is a textbook example. It recently posted quarterly revenue growth of 7.4% for a period where many companies had large negative figures.

Moreover, the stock is up about 6% on the year as of this writing. Once again, most stocks are down on the year for fairly obvious reasons.

In the end, Loblaw’s market crash protection abilities stem from the fact it’s Canada’s largest grocer. No matter how dire the economy gets, people will still need their grocery essentials.

Throughout the recent months, Loblaw has continued to provide these essential goods for Canadians. It’s done so through traditional means but also through its expanded online shopping and pick-up services.

If you’re looking for stocks with reliable and steady income from consistent operations, Loblaw is as solid as they come. You can expect better stability from Loblaw than most other stocks in the event of a market crash.

Fortis

Fortis (TSX:FTS)(NYSE:FTS) is a massive and well-diversified electric utility holding company. It has operations across the U.S. and Canada as well as the Caribbean.

Like with Loblaw, Fortis is a pillar of market crash protection. It has a beta of only 0.08 and is up slightly on the year as of this writing.

It recently posted quarterly revenue growth of 5.4% during a generally rough economic period. Its dividend-payout ratio is also sitting at 71.04%, suggesting there’s plenty of cushion still on the finances.

Fortis’s defensive traits are owed to its predictable and stable sources of cash flow. It operates largely with regulated contracts and as such has essentially fixed demand for its essential services.

As such, even during tough economic times and a market crash, the stock can still post good results. To go with its market resiliency, it also offers investors a juicy yield.

As of this writing, Fortis is trading at $54.26 and yielding 3.52%. That’s certainly not a bad dividend to pick up on top of Fortis’s defensive qualities.

In the event of a market crash, Fortis will feel the burn less than most other stocks while still providing solid dividend income.

Market crash strategy

For short- and medium-term investors, being prepared for a market crash during these times is crucial. Both Loblaw and Fortis offer investors important defensive qualities that are key during a market crash.

If you’re looking to shore up a portfolio in light of recent circumstances, these two TSX giants are worth a good look.

Interested in other top TSX stocks to watch?

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Fool contributor Jared Seguin has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.



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