For investors who have a long-term focus, are risk adverse and conservative in portfolio allocation, and want to be in equities to take advantage of higher upside on these investments relative to fixed income investments (which are currently offering little to no yield) times certainly can feel tough.
In this article, I’m going to discuss why infrastructure equities may fit such an investor type perfectly (also my investor type).
Canada is home to a number of great infrastructure plays in the pipelines, utilities and industrial sectors, and these are my top choices right now due to the defensive nature of these stocks.
I do believe a recession is on the way, and investing in defensive names in these sectors is important; especially of importance are the dividend value these companies provide, considering yields everywhere (fixed income and equities) are continuing to drop as valuations rise and we continue to hit new market highs seemingly on a weekly basis.
The defensive aspect of these industrial sub-sectors cannot be understated. In general, industrial stocks tend to have low betas, meaning in down markets, most investors can expect to see a basket of industrials in an ETF drop about half the amount the broader stock market dropped.
This downside protection is complemented by the fact that in up markets like the bull market we’re all enjoying now, while these companies are supposed to increase less than the overall market, dropping interest rates have made these high-yield securities much more valuable in the eyes of investors, meaning in our current economic situation, I expect industrials to outperform most sectors from a risk-adjusted return perspective.
Invest wisely, my friends.
