Many pundits and strategists have very downbeat expectations for what to expect in terms of returns in 2022. Indeed, the consensus is clear: 2022 won’t deliver the same type of returns that 2021 did. The S&P 500 clocked in around 28%. That would be an incredible year, even if there was a divide and a wave of rolling corrections going on in the background. Growth is on some pretty fragile footing this January.
Value, however, is looking quite solid, especially for those who expect a dot-com bust for many of the unprofitable high-flying growth names that could face intense pain if the U.S. Federal Reserve suddenly decides that more than just a trio of rate hikes are needed to stamp out inflation. Will the economy be able to take a triple shot to the chin? Or will it go down?
Stock market outlook is mixed/uncertain for 2022: But who cares?
At this juncture, it seems as though the trio of rate hikes are baked in. Still, one more for the year could cause Mr. Market to have a bit of a fit. Apart from rate hikes, Omicron and COVID variants that could follow should be watched, as they could spark lockdowns and further supply chain issues that hurt so many firms last year. In any case, investors should look to balance risk with reward to put themselves in a spot to outdo broader indices in what could easily be a rocky, challenging year.
Will 2022 beat 2021 on the returns front? To do so would require around 30% or greater return. The odds of such are low but not out of this world, especially if markets are dealt a positive surprise. What type of positive surprise? Perhaps it could be the elimination of COVID in 2022, with no surprise moves from the Fed.
Given all the mutations and rampant inflation, though, both scenarios should not be expected. And investors should not assume such when looking to buy or sell.
Growth at a discount
Without further ado, here’s one top Canadian stock that I believe could improve your chances of doubling up over the next three years. Enter Alimentation Couche-Tard (TSX:ATD), a convenience store giant that’s seen its multiple shrink due to sustained earnings growth. The company is growing fast, and it’s growing profitably. In a market environment that punishes unprofitable growth, Couche should be rewarded. But it’s not, given it’s a consumer staple in the retail scene.
Couche isn’t just your typical retail stock. It’s a convenience retail powerhouse that has what it takes to become a pioneer in the fast-changing convenience store landscape over the next decade. Undoubtedly, management is among the best in the business. CEO Brian Hannasch and his team are experts at creating value out of M&A — not just via acquisitions, but with dispositions and asset swaps.
With the company shedding its dual-share structure, expect Couche-Tard to stay on its toes, as it looks to continue its impressive earnings growth streak. I think it can, and I believe double-digit earnings growth is a likelihood, as the firm looks to embrace frictionless payments, charging stations, and new, intriguing offerings at existing stores that could bolster sales growth.
What could power Couche to double?
Its valuation is absurdly low. As investors better appreciate the growth story, the perfect mix of multiple expansion and earnings growth could lift the stock through 2024.
