There is no such thing as a “sure thing” in investing, to be clear. Every investment carries some degree of risk, and some stocks certainly have shown increased risk of late via valuations that have climbed to seriously rich levels.
That said, finding a sector or a specific stock with less potential future volatility due to stable fundamentals and a business model that is built to last is certainly a prudent idea these days.
One of the most catch phrase I’ve heard of late with respect to Waste Connections (TSX:WCN), a garbage collection company, was “there are three things one can be certain of in life: death, taxes, and garbage.”
This got me thinking about the specific nature of various sectors as either necessities or wants, and how the level of security each corresponding sector or business ought to be priced.
In short, my take is that relatively defensive sectors such as waste management/garbage collection are often undervalued in today’s world relative to other high-growth stocks fulfilling consumer wants rather than needs.
Should we enter a deep recession (or depression as some have predicted), any “wants”-related spending is likely to slow to halt, severely reducing the value of premium branded products and highly cyclical goods.
This will also result in a marked increase in the proportion of one’s pay cheque that goes toward covering basic necessities. I recommend investors organize their portfolios to be more defensive to be better safe than sorry.
Invest wisely, my friends.
