- The BoC announced a rate hike of one per cent on July 13
- NPI stock spiked by over 10 per cent in six months
- MRU scrip climbed approximately 17 per cent in 12 months
Investors could consider quality TSX defensive stocks like Metro (TSX: MRU), Cogeco communications (TSX: CCA), Northland (TSX: NPI) etc, that are likely to generate steady earnings despite the ongoing economic instability that has triggered recession worries worldwide.
The Bank of Canada (BoC) announced a rate hike of one per cent on Wednesday, July 13, to tackle increasing price pressure resulting from macroeconomic forces, including the Ukraine crisis, supply disruptions and excess demand. As the interest rate reaches 2.5 per cent, the top lender projects that Canada's economic growth could slow down to about 3.5 per cent in 2022.
As these factors impact stock markets, investors could consider the following TSX defensive stocks to tackle the economic slowdown.
1. Metro Inc (TSX: MRU)
Metro, one of the largest grocery companies in Canada, reported a sales growth of 1.9 per cent year-over-year (YoY) to C$ 4.27 billion in Q2 2022. The C$ 17-billion market cap retailer also noted a net profit surge of 5.3 per cent to C$ 198.1 million in the latest quarter compared to Q1 2021.
MRU scrip climbed approximately 17 per cent in 12 months.
2. Cogeco Communications Inc (TSX: CCA)
Cogeco is a mid-cap telecom operator with a market capitalization of about C$ 4 billion. The Canadian communication service company said its revenue rose by 16.6 per cent YoY to C$ 728.1 million in Q3 2022.
CCA stock plummeted by approximately 14 per cent year-to-date (YTD). As per Refinitiv, CCA recorded an RSI of 34.62 on July 13, marginally above the oversold mark of 30.
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3. Northland Power Inc (TSX: NPI)
Northland Power saw its sales climb by 13 per cent YoY to C$ 695 million in the first quarter of FY2022. The utility service company also noted increased profitability with a net income surge of 90 per cent in the latest quarter compared to a year ago.
NPI stock spiked by over 10 per cent in six months. As per Refinitiv findings, NPI seems to be on a consolidated trend since March this year, and on July 13, it recorded an RSI of 58.43.
4. Boralex Inc (TSX: BLX)
Boralex now owns a 100 per cent ownership interest in Infinergy Ltd, a UK-based utility firm, to expand its utility business. BLX stock swelled by nearly 21 per cent in 2022.
According to Refinitiv findings, Boralex stock seems to be on an upward trend, with an RSI of 49.78 on July 13.
5. North West Company Inc (TSX: NWC)
North West is a Canadian company with a market capitalization of C$ 1.66 billion. North West recorded a debt-to-equity (D/E) ratio of 0.68, which generally represents low financial risk.
NWC, a consumer defensive stock, jumped by about four per cent quarter-to-date (QTD). As per Refinitiv data, NWC held a moderate RSI of 53.08 on July 13.
These defensive stocks could help investors prepare to tackle economic pressure as they offer products and services with inelastic or nearly inelastic demand and provide dividend income. Hence, these stocks are related to different sectors (consumer defensive, telecommunication and utility), thereby helping in risk diversification.
Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.