3 Companies to Protect Your Portfolio From a Recession to Buy Now

There is no such thing as a perfectly recession-proof stock, but many companies with safe and evergreen business models are pretty close to the mark.

| More on:

Recession-proof stocks don’t exist. No matter how financially resilient and evergreen the underlying business is, stocks experience a dip thanks to the weight of the market pulling them down. However, investors can consider stocks that don’t fall as hard as others and offer sure and swift recoveries.

There are three such stocks that should be on your radar right now.

A utility company

The utility sector is an evergreen, healthy business. But not all utility businesses are the same. Take Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) as an example. The company combines both power generation and utility (distribution), so its assets are spread out over the entire spectrum of the electricity business.

Power generation is a stable enough business on its own, and since Algonquin focuses quite heavily on renewables, it’s a significantly more attractive business that is expected to become even more relevant in the future.

Algonquin offers a powerful combination of dividends and capital-appreciation potential. However, the stock has mostly been cyclical since the 2020 crash. It may resume its linear growth pattern, making it a powerful long-term holding capable of withstanding harsh market conditions.   

A solid waste management company

Waste Connections (TSX:WCN)(NYSE:WCN) is one of the largest private companies in the waste collection space — not just in North America but globally. The company has a massive operational range and caters to an extensive clientele in Canada and the United States. The primary business is the residential waste collection, but it also caters to commercial clients. A diverse service portfolio is also an important asset.

It’s also a powerfully resilient stock. After the 2020 crash, it took the stock only a bit over six months to fully recover. But it’s not just its history; it’s also the business model. As an essential service company, Waste Connection is safe from adverse market conditions in nearly the same way as utility companies are. It also offers a dividend, but the yield is never attractive enough.

A consumer staple company

Another powerful holding you may consider to take you through the treacherous waters of recession is Metro (TSX:MRU). Not only does it have an impressive network, but it also has the business built around two evergreen and forever-in-demand things: food and medicine.

The 950 food stores and 650 drug stores that cover an impressive geographic reach within the country give it a strong market penetration edge.

The stock recovered after the 2020 crash and reached its pre-pandemic value well before the year-end. It’s an established aristocrat, but the capital-appreciation potential attracts most investors to this stock. In the last decade, the stock has risen roughly around 300%, and if you add in the dividend, the total returns are substantially higher.

Foolish takeaway

The current market pullback is not on the 2020 level, let alone the Great Recession level. However, we don’t know when it will reach its bottom. And if you plan on buying these stocks for their resilience against inflation, you can still take advantage of the recession-driven market crash and the discounts that come with it.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Dividend Stocks

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »

young people stare at smartphones
Dividend Stocks

GST/HST “Vacation”: Everything Canadians Need to Know

The GST/HST "vacation" is a little treat for the holidays, along with a $250 payment. What should you do with…

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »