The stock market has started off 2024 very strongly. This should be very welcome news to investors who were rewarded in 2023 after a very, very rough year prior. However, with all of this success in a relatively short period, some investors could become hesitant. It’s common to think that because the market has climbed quite a bit rather quickly, we could be in for a bit of a correction.
Some may even think this fast rise in the market could result in a bear market if investors start thinking about locking in their gains. If you find yourself in that camp, don’t turn towards exchange-traded funds (ETFs). That’s a common strategy that investors follow during market downturns. They rely on that strategy because ETFs track an index. Usually, indices outperform individual stocks in bear markets, depending on the kind of companies you tend to hold.
For example, growth stocks tend to greatly underperform during bear markets. However, there are certain stocks that could beat the TSX during a bear market. In this article, I’ll discuss two of those companies. So, if you’re worried about a market collapse, here are two stocks that could beat a bear market!
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An outstanding dividend company
Canadian National Railway (TSX:CNR) is the first stock that I think investors should consider buying to beat a bear market. This is one of the largest railway companies in North America. It operates 33,000 km of track, with rail spanning from British Columbia to Nova Scotia. Despite its name, Canadian National Railway does operate in the United States, going as far south as Louisiana.
What intrigues me about railway companies in general is that there isn’t a viable way to transport large amounts of goods over long distances, if not via rail. In Canada, Canadian National Railway stands out as a clear market leader.
In 2022, Canadian National Railway stock gained about 5.3%. Although it’s quite a modest gain, keep in mind that the TSX lost about 6% of its value over the same period. That means Canadian National Railway stock was a major winner during one of the worst market years in recent history.
A tech stock worth considering during bear markets
Constellation Software (TSX:CSU) is another stock that I think investors should consider buying to beat a bear market. As its name suggests, Constellation Software is a tech company, which seems a bit counterintuitive to be investing in during a bear market. In addition, I mentioned that growth stocks tend to underperform during bear markets, so what gives?
Well, it turns out that Constellation Software is not like any other growth stock. In 2022, this stock actually gained over 2%. While that may not seem like a lot, consider that it still beat the TSX and performed much better than the vast majority of other tech stocks. Many of which lost more than 50% of their value in 2022. What’s even better is that Constellation Software greatly outperforms during bull markets. For a stock to outperform in any market condition, it only makes sense to add this to your portfolio.
