Canada Markets close in 1 hr 29 mins

3 Stocks to Add During a Market Downturn

A bull and bear face off.
A bull and bear face off.

Written by Demetris Afxentiou at The Motley Fool Canada

As we move into the final weeks of 2022, it’s the perfect time to review your portfolio and consider adding some stocks that can offset market volatility. Specifically, investors may want to consider stocks to add during a market downturn or before one.

Look for defensive investments to add during a market downturn

Defensive investments are must-haves. These investments often boast reliable revenue streams and are not as volatile to market fluctuations.

One example to consider is BCE (TSX:BCE). BCE is one of the largest telecoms in Canada. In addition to providing the usual complement of subscription-based services, BCE also boasts a massive media segment.

So, then, what makes BCE a great defensive investment to consider right now? That comes down to the company’s wireless and internet segments.

In the past decade, wireless devices have quickly become an extension of ourselves. The devices have replaced well over 100 standalone peripherals that we used to carry or have in our homes with apps.  Those apps are constantly updated and consume more data.

In other words, our data needs are increasing at an alarming rate, and BCE, the proprietor of that data, reaps the rewards. In fact, in the most recent quarter, wireless operating revenue surged 7.4% over the prior period, coming in at $2,466 million.

Turning to internet connections, that too saw growth in the most recent quarter. The segment saw the highest net activations in 17 years, with 89,652 activations in the quarter. That growth continues to be fueled by the growing necessity for a fast and stable internet connection.

Both segments have helped BCE become a much more defensive option for investors to add during a market downturn, but that’s not all. Apart from that added defensive appeal, BCE offers a juicy quarterly dividend. The current yield, which is one of the best on the market, boasts an appetizing 5.74%.

Speaking of defensive…

It would be impossible to mention a list of stocks to add during a market downturn without mentioning the defensive appeal of Fortis (TSX:FTS). Fortis is one of the largest utilities on the continent.

Utilities boast one of the most stable business models on the market. In short, the utility is bound by long-term regulatory contracts to provide a service. For as long as that service is provided, the utility generates a stable and recurring revenue stream.

Those long-term contracts can be more than a decade in duration, and in the case of Fortis, the company has contracted facilities located throughout Canada, the U.S., and the Caribbean.

That revenue stream helps Fortis to invest in growth and provide a quarterly dividend to investors. That dividend currently works out to a yield of 4.19%, and Fortis has provided generous upticks to that dividend for 49 consecutive years.

A history of outperforming in a downturn

Canada’s big banks are almost always a great long-term investment option, irrespective of how the market is faring. And in the case of Toronto-Dominion Bank (TSX:TD), that could be the bank your portfolio needs.

TD is the second largest of Canada’s big banks. It’s also one of the largest banks in the huge U.S. market, with a sprawling branch network extending from Maine to Florida. Much of that U.S. growth stems back to the period following the last major market downturn, the Great Recession.

Specifically, TD acquired several regional banks and stitched them together into the massive network it operates today. And now that the market appears poised to enter another downturn in 2023, TD is set to expand again.

Earlier this year, TD announced a US$13.4 billion deal to acquire Memphis-based First Horizon. The deal, which is expected to close early next year, will greatly expand TD’s presence across the U.S. southeast region. That expansion will add an additional 400 branches to TD’s network and come with US$75 billion in deposits.

The deal will catapult TD into position as one of the top-six banks in the U.S. market and provide fuel for TD’s juicy quarterly dividend. That dividend currently boasts a yield of 3.96%.

Final thoughts

No stock is without risk. That’s why it’s important to diversify, and why the stocks mentioned above would be great additions to any well-diversified portfolio.

The post 3 Stocks to Add During a Market Downturn appeared first on The Motley Fool Canada.

Should You Invest $1,000 In BCE?

Before you consider BCE, you'll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 ... and BCE wasn't on the list.

The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks * Returns as of 11/4/22

More reading

Fool contributor Demetris Afxentiou has positions in Fortis and Toronto-Dominion Bank. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

2022