Despite the macro challenges and political uncertainty, the S&P/TSX Composite Index rose above 8% in 2023. The signs of easing inflation, solid quarterly performances, and the expectation that the Federal Reserve could slash its benchmark interest rates three times this year have strengthened investors’ sentiments, driving the equity markets higher.
However, the Organisation for Economic Co-operation and Development (OEDC) projects global gross domestic product growth to decline from 2.9% in 2023 to 2.7%. The organization predicts the impact of monetary tightening initiatives, weaker trade, and declining business and consumer confidence will lead to a slowdown. So, given the uncertain outlook, investors should strengthen their portfolios by adding safe stocks.
Here are my three top picks.
Waste Connections
Waste Connections (TSX:WCN) collects, transfers, and disposes of unhazardous solid wastes. It primarily operates in exclusive or secondary markets, thus facing less competition. So, the company enjoys higher margins despite its aggressive acquisition strategy. Driven by its solid underlying business and strategic acquisitions, the company has delivered solid financials over the last 10 years while increasing its stock price by 350% at a healthier annualized rate of 16.3%.
Meanwhile, continuing its acquisition strategy, the company recently signed an agreement to acquire 30 energy waste treatment and disposal facilities from Secure Energy Services for $1.1 billion. The company hopes to close these acquisitions this quarter, which could add an overall $300 million to its annual revenue. Further, its organic growth through investments in renewable natural gas and resource recovery facilities and improved operating efficiency through the introduction of robotics could drive its financials in the coming quarters.
Considering the essential nature of its business and healthy growth prospects, I believe Waste Connections would be a safe stock to have in your portfolio in this uncertain outlook.
Fortis
Fortis (TSX:FTS) is a diversified utility company that serves 3.4 million customers across North America, meeting their electric and natural gas needs. With around 93% of its assets involved in the transmission and distribution business, its financials are stable and predictable, irrespective of the economic outlook. Supported by its stable financials, the company has returned over 510% in the last 20 years at an annualized rate of 9.5%. It has also raised its dividend for 50 consecutive years, with its forward yield at 4.33%.
Further, the utility company plans to invest around $25 billion through 2028, which could grow its rate base at a CAGR (compound annual growth rate) of 6.3%. Amid these growth initiatives, the company’s management hopes to raise its dividend at an annualized rate of 4-6% through 2028. So, I believe Fortis could provide stability to your portfolio.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD), which operates 14,425 convenience stores worldwide, would be another safe stock to add to your portfolio. Offering convenience products and mobility services, it has delivered stable financials even during economic downturns. Also, the company has expanded its footprint through strategic acquisitions, thus driving its financials. Supported by financial growth, the retailer has returned around 520% over the last 10 years at a CAGR of approximately 20%.
Meanwhile, the company has adopted a “10 For The Win” strategy to grow its EBITDA (earnings before interest, tax, depreciation, and amortization) to $ 10 billion by 2028. It focuses on both organic growth and strategic acquisitions to drive its financials. Meanwhile, the convenience store operator is focusing on expanding its product portfolio, entering new categories, optimizing distribution, and strengthening its marketing and promotional activities to boost its organic growth. ATD trades at 0.8 times analysts’ sales projections for the next four quarters, making it an attractive buy.
