WARNING: 2 Canadian Stocks That Got Hit Hard This Week

Alimentation Couche-Tard Inc. (TSX:ATD.B) and another stock got unfairly punished over the past week.

| More on:
Red siren flashing

Image source: Getty Images.

Buying the dip has been an effective strategy for TFSA investors, as this bull market has quickly regained its footing after its odd stumbles. The following two stocks have faced a considerable amount of damage over the past week over reasons that I believe are overblown beyond proportion, opening a window of opportunity for contrarian investors to bag a big discount that may not last for long.

Alimentation Couche-Tard

Global convenience store kingpin Alimentation Couche-Tard (TSX:ATD.B) shed 5% last week, as the broader markets crept towards all-time highs. The stock has been under pressure over news that the company has sweetened the pot in an effort to acquire Caltex Australia, with an offer that currently stands at $5.93 billion.

The stock retreated 1% on Thursday over fears that Couche-Tard may be at risk of overpaying for the convenience store chain that’s been pressured to make a sale. A takeover of Caltex would undoubtedly put Couche-Tard on the map in the Australasian region, a high-ROE market that management strongly desires to form a foundation in. There are issues at Caltex, and given Couche-Tard’s management team is among the best in the business, there were ample improvements and synergies to be had from a deal.

Of course, the value to be had from such a deal depends on the price paid, so the recent offer sweetening has left a bitter taste in the mouth of Couche-Tard investors.

In a prior piece, I’d highlighted the fact that Couche-Tard’s management team wasn’t one to risk overpaying for an acquisition. While sweetening deals diminishes a bit of long-term value to be had for shareholders, it’s worth remembering that management is not one to risk overpaying for an acquisition. They’ve walked away from potential deals in the past, and if Caltex wants more sweetener, Couche may walk away once again.

Given management now has a better gauge of synergies to be had, it’s entirely possible that expected synergies may be a lot higher than initially expected. And if that’s the case, there’s no good reason as to why Couche-Tard stock should be under so much pressure. I think overpayment for the deal is out of the question. The only question now is just how much synergies there are to be realized.


Manulife (TSX:MFC)(NYSE:MFC) stock pulled back nearly 2% on Thursday following a rough quarter that missed analyst expectations on the earnings front, with decaying sales in Asia and softness in Canada.

“With large exposure to Asia (earnings slowed), Manulife’s conference call will certainly focus on this segment and potential coronavirus implications. We believe near-term sentiment on the stock has been impacted with MFC shares trailing peers and benchmark indices year-to-date.” said Canaccord Genuity analyst Scott Chan in a research note.

Manulife’s Asian business may soon grow to account for a third of overall profitability, and with the implications of the coronavirus highlighting the company’s earnings call, investors have a right to be cautious on the name. Management thinks it’s too early to tell if the outbreak will severely impact the Asian business, but I think investors would be wise to take a wait-and-see approach with the stock.

Shares are currently down 6% from all-time highs, but the decline could become much more extensive over the coming weeks, as investors have an opportunity to digest the recent results and weigh the new slate of uncertainties. At 8.4 times next year’s expected earnings, MFC is dirt cheap, but that doesn’t mean it can’t get even cheaper, despite its promising long-term fundamentals.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette owns shares of ALIMENTATION COUCHE-TARD INC. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC.

More on Dividend Stocks

Dividend Stocks

1 Oversold Dividend Stock I’d Buy in December 2022

Here’s one of the best Canadian dividend stocks to buy in December that I find undervalued.

Read more »

Make a choice, path to success, sign
Dividend Stocks

Algonquin Power Stock: Time to Buy or Buyer Beware?

Algonquin Power stock has a massive 9.5% dividend yield. It looks appealing, but is it time to buy or beware?

Read more »

TFSA and coins
Dividend Stocks

2 Top TSX Stocks to Buy Now for TFSA Passive Income

Stocks with good dividend growth are now on sale for investors seeking passive income.

Read more »

Dividend Stocks

2 TSX Stocks to Buy in December for Passive Income

These two TSX dividend stocks are some of the best to buy today and can offer years of growing passive…

Read more »

Increasing yield
Dividend Stocks

2 High-Yield Dividend Stocks You Could Hold for Years

You can consider adding these two large-cap Canadian dividend stocks to your portfolio now to hold for the long term.

Read more »

Female hand holding piggy bank. Save money and financial investment
Dividend Stocks

How to Turn a $10,000 TFSA or RRSP Into $415,000 for Retirement

This investing strategy has made some patient investors quite rich.

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

3 Essential Stocks I’d Buy No Matter the Price

These essential stocks aren't just good options right now; they're stable choices for decades for investors looking to set up…

Read more »

Growth from coins
Dividend Stocks

TFSA Investors: Buy and Forget This Top Oversold Dividend Stock

This dividend stock has seen shares collapse this year, with a poor year expected. But does that mean it's a…

Read more »