As Fools, we seek to buy wonderful businesses at wonderful prices (or even fair prices). If you’re not keen on swinging on such a “perfect” pitch, you may wish to improve your margin of safety (or risk/reward trade-off) further by ensuring that such wonderful businesses at wonderful prices also have stocks that have wonderful technicals.
Here are three such stocks that Canadians may want to swing at this December.
Shaw Communications (TSX:SJR.B)(NYSE:SJR) is Canada’s fourth major telecom player that’s hungry for the wireless market share of the Big Three incumbents.
Over time, I believe Shaw will be the beneficiary of significant share taking in the Canadian wireless scene, aided by the rollout of new telecom tech and regulatory hurdles that will be placed in front of Shaw’s competitors. Through the eyes of the Big Three, Shaw is a severe threat to the bottom line.
Shaw stock has a bountiful dividend that yields 4.4% and the capacity to support above-average annualized dividend growth moving forward. The stock is relatively cheap, given the magnitude of growth on the horizon, with shares trading at just 8.3 times EV/EBITDA at the time of writing.
To add the cherry on top of the sundae, Shaw stock has a very encouraging reverse head-and-shoulders reversal pattern that looks to be in the works. Such a pattern implies that the stock could hit $32 over the intermediate term, or around 18% upside from today’s levels.
Sticking with the telecom theme, we have Quebecor (TSX:QBR.B), the telecom firm behind Vidéotron that’s essentially formed a moat around its home province of Quebec.
The company isn’t in a position to take a massive amount of share away from an incumbent like Shaw, but what the company does have is a deep penetration within its home market and arguably the highest brand loyalty of any telecom (thanks in part to the language barrier!).
“Quebecor isn’t trying to spread itself too thin by trying to dominate as much of the Canadian market as it can. It’s found its niche within Quebec, and with plenty of infrastructure to spend on, there’s really no point for the company to attempt to aggressively expand from coast to coast.” I said in a prior piece.
The seemingly wonderful business also trades at a stupidly low multiple, with shares trading at just 8.4 times EV/EBITDA and 13.8 times next year’s expected earnings.
Technically, the name is sound with the stock that’s on the verge of breaking out past its $33 level of resistance. Quebecor isn’t as technically sound as Shaw, but it’s still a timely bet, nonetheless.
Finally, we have Alimentation Couche-Tard (TSX:ATD.B), the convenience store kingpin that’s grown by leaps and bounds through M&A. The company has a wonderful management team with CEO Brian Hannasch at the helm and an ambitious founder who sees Couche-Tard doubling its net income over the next five years.
Couche-Tard is a double-digit revenue and earnings grower with defensive characteristics, making it suitable to own in an economic downturn. Despite this, the stock trades at a mere 12.1 times EV/EBITDA (lower than the five-year historical average of 12.7 times EV/EBITDA), which is absurd given that the company is closing in on what could be the firm’s largest acquisition to date.
Even if Couche-Tard doesn’t bag Caltex, which would give Couche-Tard an excellent foundation in Australia, the company still has enough dry powder and the know-how to find other accretive acquisitions that will keep the stock surging higher now and over the long term.
Technically, Couche-Tard stock looks very strong with shares just beginning to break out.
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Fool contributor Joey Frenette owns shares of ALIMENTATION COUCHE-TARD INC and SHAW COMMUNICATIONS INC., CL.B, NV. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC.