With the TSX Index After three quarters of impressive gains, investors may be wondering whether it’s worth holding on to the risky names at year’s end. After all, a correction can always punish investors. And with valuations much higher than they were a year ago, it only seems sensible to pull out the stops here and there, perhaps selling some tax-loss losses before the focus shifts to the holidays.
While it may make sense to raise some money through stock sales if you no longer see the value of a name (the market price has risen far beyond your estimate of its value), I don’t think selling based on talking head vibes is too good an idea.
While a correction call will ultimately be justified, I think the best move for investors is to be prepared for a windy road, rather than avoid it. If you focus on the next seven years and not just the next seven months, it seems sensible to lock in volatility and take advantage of dips along the way. At this point, I’d be more inclined to look at some stability stocks if you’re looking to ‘shock’ the portfolio before turbulence has a chance to rock the markets again.
In this piece, we’ll quickly discuss a few names that may be able to help stabilize your portfolio before the next market disruption takes hold.
Fortis
Fortis (TSX:FTS) is a great proxy for bonds, and while stocks are getting more expensive at new highs just above $70 per share, I still see a lot of upside potential in the steady, predictable dividend grower. The beta stands at 0.35, so FTS stock has an above-average chance of being in the green on a red day for the markets. As energy demand grows (thanks in part to AI models), it may be the transmission lines that stand out as indirect winners in the longer term.
With a stable long-term growth plan (five-year capital plan) and the potential to extend such a plan (or become more aggressive as rates continue to decline), I view Fortis as a strong candidate to beat bonds over the long term and the riskiest stocks on the way down. While the long-term profit potential of FTS stocks is somewhat limited compared to tech, I like the name as a portfolio stabilizer for those fearful of the damage a correction could cause to their TFSA portfolios.
Loblaw
Do you need something that is a bit more growing? Loblaw (TSX:L) stands out as a defensive growth strategy with a low beta (also at 0.35) that can hold up when things get a little more turbulent in the stock market. Its shares have more than tripled in five years, which isn’t a typical performance for a defensive grocer, to say the least, especially one that doubles down on low-cost, high-end brands.
As inflation continues to weigh and employment faces new challenges in the new year, I’m betting the local No Frills will still be full as Canadians look to “trade up” on their favorite organic grocers to save big. I have no idea when food inflation will drop (and stay below) the 3% level. Regardless, Loblaw is a name that can do well despite an environment that is less optimistic for consumers. As the company embraces new technology, such as self-driving trucks, I think margins could also get a nice, sustainable boost.
#stocks #stability #TFSA