The planet’s most successful investors are looking at the recent market crash with excitement.
They know top companies with great businesses are trading at very attractive valuations. In some cases, investing pros say this could be the buying opportunity of a lifetime.
Market crash background
The stock market crash that has occurred in the past month is certainly one for the record books.
The TSX Index is down from a high near 18,000 to a current value close to 11,850. That’s a 34% plunge in a very short time. The carnage is widespread with the energy sector taking the heaviest hit. Canada’s leading oil and gas producers are down 65-70% from their January highs.
Canadian bank stocks are down 25-40% in the past four weeks. Pipeline stocks, utilities, and telecoms are also getting hammered. Even gold, which is often viewed as safe-haven asset, is down 10% from the 2020 peak.
The coronavirus outbreak is largely to blame for the recent turmoil. Now that the virus is spreading extensively beyond China, investors worry the economic impact will be dire.
Canada just saw unemployment insurance applications spike by 500,000. The recent layoffs are primarily due to the shutdown of businesses in the tourism and service sectors. As lockdown orders expand across the country, additional job losses are expected.
The Canadian government announced $82 billion in aid to help people and businesses pay rent and cover expenses during the hard times. Bailouts for airlines and the energy sector are probably on the way. The global airline industry is effectively shutting down as countries ban foreign visitors. Regarding oil, the price of Western Canadian Select oil is at a record low near US$5 per barrel, and WTI oil is down to US$24 from US$63 in January.
The coming weeks or even months will be challenging. Volatility should be expected in the stock markets, and the TSX Index might see additional downside. However, top businesses that are industry leaders and serve as key enablers of the Canadian and U.S. economies will eventually recover.
These stocks tend to be reliable payers of growing dividends and can generate profits during difficult times. Let’s take a look at one top Canadian stock that might be an interesting pick for a buy-and-hold TFSA portfolio.
Canadian National Railway (TSX:CNR)(NYSE:CNI) is the only rail carrier in Canada and the United States that has routes connecting three coasts. This is an important advantage that won’t change anytime soon.
The company transports everything from cars, crude oil, and coal to forestry products, grain, fertilizer, and finished goods. A steep decline in economic activity will put pressure on demand for CN’s services, but the downturn should be short-lived.
China’s coronavirus outbreak appears to have peaked and reports indicate the country is slowly getting back to work. Closer to home, the United States has yet to see the worst of its outbreak. The American government is working on a relief package that could top $2 trillion. Canada is expected to announce additional stimulus measures. Europe will follow the same path to get economic activity rolling again once the coronavirus outbreak is under control.
The result could be a strong economic surge. If that happens, equity markets might regain their losses more quickly than many people expect.
CN generates solid free cash flow and has a great track record of dividend growth. The stock currently trades at $99 per share compared to $127 in February. History suggests that buying the stock during a market crash will produce solid returns in the long run.
A $10,000 investment in CN 20 years ago would be worth more than $200,000 today. The same amount invested in CN in March 2009, at the peak of the last financial crisis, would be worth $60,000.
The bottom line
It takes courage to buy top stocks during a market crash, but the rewards can be substantial.
CN is one top Canadian dividend stock that appears oversold right now. A number of other top TSX Index stocks deserve to be on your TFSA radar today.
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David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of and recommends Canadian National Railway. Fool contributor Andrew Walker has no position in any stock mentioned.
Ontario sees two new deaths as COVID-19 cases rise by 211 – Toronto Star
Ontario has another 211 confirmed cases of COVID-19, a jump of 18 per cent that includes a second worker at the Real Canadian Superstore in Oshawa and a Mississauga firefighter.
There have been two more deaths, bringing the total to 21, according to Ministry of Health statistics released Sunday.
Loblaw said the Oshawa store on Gibb St. has been shuttered temporarily. It’s the same outlet that employed Ontario’s youngest COVID-19 fatality, 48-year-old Keith Saunders, who died Thursday.
“With the community spread of COVID-19, it’s unfortunate but inevitable that some stores will be affected,” said Catherine Thomas, senior director of external communication for the company.
“We’ve closed the store, brought in third-party sanitization experts, and worked closely with local public health to ensure we reopen safely and that colleagues who may have been directly exposed are not in the store.” The store reopened later Sunday morning.
Ontario has now recorded 1,355 cases of the new coronavirus, including the 21 deaths — mostly the vulnerable elderly — and eight cases that have been cleared since the outbreak began in late January.
The numbers are considerably higher than last weekend, when Ontario had just three deaths and 380 cases.
Across Canada, there have been 63 deaths and 5,866 cases, federal chief public health officer Dr. Theresa Tam told a news conference in Ottawa on Sunday.
She served an early warning that Canadians will have to be flexible with upcoming religious celebrations such as Easter and Ramadan, which “will need to be adapted” with physical distancing in place.
Mississauga Fire Chief Tim Beckett said the station where the affected firefighter worked has been closed temporarily and its territory covered by nearby firehouses.
“We’ve got extra decontamination processes,” he added, noting several firefighters who were in close contact are home in self-isolation.
The number of Ontario cases cleared — just eight — is artificially low because it does not reflect the number of people who have recovered but not been tested as priorities shift to the seriously ill, health-care workers, the elderly and First Nations.
A surge in case numbers from returning travellers who have caught COVID-19 and transmitted it to close contacts, as well as infections acquired in the community, has left public health units swamped.
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That’s why the exact cause of infection in about 40 per cent of Ontario cases has not yet been traced, let alone people they may have put at risk for the virus, provincial health officials say.
The federal government says community transmission now accounts for 65 per cent of cases, with travel declining to 35 per cent.
Russia says OPEC+ deal revival possible if other countries join in – RT
A new agreement to stabilize oil markets is possible if more nations support the initiative, according to the head of the Russian Direct Investment Fund (RDIF), Kirill Dmitriev.
In an interview to Reuters, the sovereign wealth fund chief said that coronavirus epidemic has become a “perfect storm” to trigger a new global financial crisis that will result in recession. To offset the economic fallout of the outbreak, countries should unite, including in imposing new output curbs to end the oil market turbulence.
Russia, which is not a member of the the Organization of the Petroleum Exporting Countries (OPEC), was one of the key supporters of the production cut pact with the alliance, Dmitriev stressed, adding that the deal brought more than 10 trillion rubles (nearly $127 billion) to the country’s budget. Earlier this month Moscow and the OPEC kingpin, Riyadh, failed to agree on a new deal, sending oil prices to multi-year lows.
“It was not Russia that made decision to boost output and withdraw from the OPEC+, but we [the RDIF] believe that we can back to the deal,” Dmitriev said, adding that Russia maintains dialogue with Saudi Arabia, as well as with some other nations.
“We see that if the number of OPEC+ members will increase and other countries will join there is a possibility of a joint agreement to balance oil markets,” he added without elaborating which countries could join the deal.
Meanwhile Saudi Arabia said it had no contact over the possibility of a new agreement on oil production caps, as well as enlargement of the deal, at least at the energy ministers level.
Oil prices have been tumbling since the beginning of the month as the failure of Vienna talks was taken as the beginning of a full-scale oil price war — the claim that was later denied by Moscow. Both benchmark brands, WTI and Brent, were trading lower on Friday, ending the week at $21.51 per barrel and $27.95 per barrel respectively.
For more stories on economy & finance visit RT’s business section
Stock Market Crash 2020: What to Buy Right Now – The Motley Fool Canada
The coronavirus (COVID-19) blindsided many investors as it paved the way for the stock market crash 2020, killing the bull shortly after its 11th birthday.
At first, many thought the virus would be contained in China. But when the virus spread across the entire globe, causing a new wave of exponential spread, the stock market crumbled like a paper bag, bringing down safe-haven assets with it. There was a rush for cash, and not even bonds, gold, or REITs (traditionally safe alternative assets) were safe to hide in.
Stock market crash 2020: never exhaust your cash reserves because liquidity could dry up again!
Many of the folks who were 100% equities got into trouble when liquidity dried up across the board. So, it’s always advisable to always have an emergency fund, so you don’t have to decide between paying your rent for the month and hanging onto your holdings before a rebound.
Don’t give yourself an opportunity to sell at a loss. If you do, you could miss out on the 20% three-day rally like the one we had last week. While the sudden surge may prove to be a pronounced dead cat’s bounce, the waters are relatively safe to get back in if you’re like Warren Buffett and have a hoard of cash sitting around.
The US$2 trillion stimulus package could mark the bottom of the stock market crash of 2020, but of course, only time will tell, as the coronavirus continues its rapid spread across the world.
In any case, investors should look to blue-chip dividend stocks if they’re cautiously optimistic and don’t want to lose their shirt if it turns out we’re nowhere close to hitting a market bottom.
Stock market crash 2020: Cheap dividend stocks are a great way to dip your toe into the rough market waters
Consider stocks with a large margin of safety and safe dividends that can pay you a handsome amount while you wait for the stock market to recover. The Big Six like Royal Bank of Canada (TSX:RY)(NYSE:RY) may be among the best of bargains to consider at this juncture.
Royal Bank currently sports a 5% yield, which, while smaller than some of its more battered peers is still rich given the strength and resilience that the bank exhibited amid the Canadian credit downturn.
Royal Bank also was one of the first Canadian banks to come roaring back after the Financial Crisis hit, and as the coronavirus crisis inevitably falls into the rear-view mirror, Royal Bank will be one of the first Canadian stocks to make a return to its all-time highs.
Royal Bank of Canada: A king among banks
As far as ROE is concerned, Royal Bank is considered royalty. The bank’s capital markets and wealth management businesses were firing on all cylinders for the first quarter. And with impressive volume growth in the Canadian banking business, it’s clear that Royal Bank remains a king among Canada’s banking scene even with the seemingly overwhelming macro headwinds.
Despite the bank’s continued outperformance relative to its peers group, it won’t be immune from the devastating impact of the coronavirus. Management cited it had limited exposure to impacted regions, but in the end, the looming global economic recession will stand to major drag results for the year.
In any case, a new bull will eventually come charging out of the gate and Royal Bank will likely lead the upward charge. I’d buy Royal Bank while it’s down over 21%.
While you could grab a steeper bargain with most other stocks out there, I’d argue that buying Royal Bank today is akin to picking up loose quarters that have been dropped in a safe zone and not loonies that are sitting before a steamroller!
Stay hungry. Stay Foolish.
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Fool contributor Joey Frenette has no position in any of the stocks mentioned.
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