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3 Top Picks for 2019

The tone of the market has turned decidedly more risk averse, with growth stocks and highly valued stocks being hit hard, and the more defensive stocks getting a long overdue boost.

With this trend very likely to continue into 2019, investors should consider adding the following stocks to their portfolios.

CCL Industries (TSX:CCL.B)

This $10 billion label and packaging company has grown consistently and profitably over the last 10 years, creating shareholder wealth through both capital appreciation and dividend payments. In fact, the company has grown from revenue of $1.2 billion in 2009 to revenue of $4.8 billion in 2017 for a compound annual growth rate of 18.8%.

And the corresponding increase in free cash flow has been even more impressive. In 2009, the company generated $52.3 million in free cash flow, and in 2017 it generated $329 million for a compound annual growth rate 30%.

While CCL stock is down over 7% year to date and down almost 20% from its highs of this summer, in my view, this gives us a perfect opportunity to add the stock to our portfolios.

With a product assortment that is not particularly economically sensitive, a global manufacturing network, and a strong balance sheet, CCL is well positioned to continue to drive shareholder value.

Alimentation Couche-Tard (TSX:ATD.B)

Couche-Tard is still hovering around all-time highs, as the company has been firing on all cylinders and as investor sentiment has been shifting toward more defensive stocks.

With a global network of 10,000 stores globally, the company has a history of profitably growing, both organically and through acquisitions.

Strong cash flows is one of the key characteristics of the company’s business model, as demonstrated by the company’s free cash flow generation (excluding acquisitions) of almost $3 billion in the last three years, its 8.6% five-year compound annual growth rate in operating cash flow, and a respectable free cash flow margin of over 2%.

Going forward, we can expect continued synergies from the company’s recent acquisitions as well as deleveraging of the balance sheet and continued growth both organically and via acquisitions, with the company’s target being to double the company once again.

Waste Connections (TSX:WCN)(NYSE:WCN)

Waste Connections has continued its ascent in a market that has continued its relentless descent.

The company has given investors a rapidly growing dividend, many consecutive quarters of better-than-expected results, massive free cash flow generation, and a strong balance sheet.

With a 24% dividend-growth rate in 2016, a 22% dividend increase in 2017, an expected 16% dividend-growth rate in 2018, and a doubling of the share price since January 2016, Waste Connections stock has given investors the best of both worlds: income and capital appreciation.

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Fool contributor Karen Thomas has no position in any of the stocks mentioned. Alimentation Couche-Tard and CCL Industries are recommendations of Stock Advisor Canada.

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