Despite a slight recovery in stocks this week, we are still largely in a bear market. With the uncertainty and volatility still prevalent, expect more turbulence for the actions to come.
Now, long-term investors looking to buy and hold stocks for 10 or 20 years may see this bear market as a chance to buy many top-quality stocks cheaply.
However, those with a shorter investment horizon cannot afford to park money in a stock that may take a few years to recover.
Instead, they can look for defensive actions that can outperform a bear market in the short term.
Today we’re going to look at two defensive actions that are about to perform well.
Fortis (TSX: FTS) (NYSE: FTS) is a huge electric utility based in St. John’s, Newfoundland and Labrador. At the time of writing, Fortis is trading at $ 55.62 and reports 3.43%.
Fortis serves customers in Canada, the United States and the Caribbean regions. Almost all of its assets and distribution channels are highly regulated.
This means that Fortis’ cash flows are incredibly stable and predictable. As such, it is not surprising that its dividend is one of the safest on the market.
Since utilities are a highly non-cyclical service, Fortis is expected to have constant demand for its services in a bear market. Fortis’ profits and profits should therefore remain constant even in the event of a slowdown.
This, along with its attractive dividend that investors can sit down and collect, make it an excellent defensive title ready to beat the bear market.
By holding Fortis for one year, an investor could earn more than $ 340 from the dividends of an $ 10,000 investment, plus any gain in share price while Fortis continues to operate.
Dollarama (TSX: DOL) is a dollar store chain based in Montreal, Quebec. It has more than 1,000 stores across Canada, with a presence in each province.
At the time of writing, it was trading at $ 41.25 and yielded 0.43%. It is important to note that since dollar stores operate with thinner margins, the return to investors is often minimal.
Investors will therefore not enjoy the same luxury as Fortis in terms of a juicy dividend while their money is parked. Still, the yield is higher than most banks will offer on a savings account, and there should be a rise in the stock price coming up.
Dollarama provides essential services because it sells inexpensive groceries and essential household items. As such, it should see stable demand (and perhaps an increase in demand) if the bear market continues and a recession takes place.
So it would be fair to expect Dollarama to post solid profits as we go through difficult times and outperform the bear market on a large scale.
Bear market strategy
While long-term investors can easily overcome short-term volatility, investors with a shorter window should exercise caution.
In this low rate environment, however, a savings account will do nothing. Thus, investors could be better off by choosing solid defensive stocks to exit the bear market.
Fortis and Dollarama are the two main defensive stocks that Canadian investors can hang their hats on. Fortis, in particular, offers a combination of an attractive dividend yield and a very consistent profit.
If you are looking for stocks to beat the bear market, consider Fortis and Dollarama.
Canadian stocks to buy cheaply during the stock market crash
Many investors fear a market collapse. However, long-term investors should accept this crash, as bear markets can potentially save you millions. So if you’re tired of reading that other people are getting rich in the stock market, this could be a good day for you.
Because Motley Fool Canada offers a full 65% discount on the list price for its best stock selection service, plus a full membership refund guarantee on what you pay for the service. Just click here to find out how you can benefit.
Learn more today!