As cracks emerge in North American stock markets, with a dangerous combination of rising speculative activity and a weakening economic outlook, investors are actively seeking defensive assets that can withstand market pullbacks.
Against this backdrop, three stocks listed on the Toronto Stock Exchange – Waste Connections (TSX:WCN), Fortis (TSX:FTS), and Chartwell Retirement Residences (TSX:CSH.UN) – have become a focus of market attention due to their unique business models and robust financial performance.
Waste Connections: A Steady Giant in the Waste Disposal Industry
As the third-largest waste management company in North America with a market cap of $60 billion, Waste Connections’ investment thesis is built on both the essential nature of its business and its regional monopolistic characteristics. Waste removal is a crucial service for societal functioning, and as populations grow, waste volumes naturally increase, providing the company with a continuous revenue stream.
The company excels at operating in secondary markets or areas where it can be the dominant supplier. Once landfills and collection networks are established, they form insurmountable competitive barriers. Over the past five years, Waste Connections has achieved compound annual growth rates of 11% in revenue and 25% in earnings per share, demonstrating exceptional pricing power and acquisition integration capabilities. The stock is down 5% year-to-date, with a P/E ratio of 30, its lowest level since late 2023. This pullback presents a rare entry opportunity for investors. In an uncertain market environment, such an essential service provider with stable cash flows is particularly valuable.
Fortis: A Low-Volatility Utility Fortress
For investors seeking ultimate defensiveness, Fortis has long been a favorite among Canadian investors. This $36 billion market cap utility company focuses almost entirely on regulated utility operations, owning transmission and distribution assets across North America that are essential for stable power grid operations.
Fortis stock exhibits low volatility characteristics and weak correlation with the broader market, making it a true safe haven. The company recently announced a new five-year capital plan, committing to invest $28.8 billion, with its rate base expected to grow at a 7% compound annual growth rate. More notably, Fortis just announced its 52nd consecutive dividend increase and plans to maintain 4-6% annual dividend growth over the next five years, with a current dividend yield of 3.5%. This predictable earnings growth and stable dividend policy provide investors with a reliable income source during periods of market turbulence.
Chartwell: Beneficiary of Demographic Aging Trends
As Canada’s largest pure-play retirement and independent living services provider with a market cap of $5.95 billion, Chartwell Retirement Residences is staging a strong recovery from the pandemic impact. The stock has surged 157% over the past three years and 95% over five years, demonstrating strong recovery momentum.
The company has significantly improved operational efficiency through measures such as optimizing its portfolio, increasing occupancy rates, and improving its balance sheet. As baby boomers enter peak retirement years and Canada’s elderly population continues to grow, Chartwell’s retirement communities benefit from long-term structural demand. Currently, the stock offers a 3% dividend yield and trades at a substantial discount compared to US peers, suggesting potential for valuation multiple expansion. Chartwell combines defensive characteristics with long-term growth potential, making it an quality choice for investors looking to capitalize on demographic aging trends.
A Solid Foundation for Defensive Portfolios
In the current market environment, these three Canadian stocks each have distinct characteristics: Waste Connections builds competitive moats through its essential service attributes; Fortis provides stable returns through regulated operations; and Chartwell benefits from irreversible demographic trends. Together, they form a defensive investment portfolio capable of weathering market fluctuations, offering peace of mind for investors concerned about market pullbacks. As economic uncertainties persist, the defensive value of such assets with robust fundamentals and dividend yields will become increasingly prominent.
