2 Top Value Stocks I’m Looking to Buy Right Now

These two top Canadian value stocks are top of my list right now for companies I’m considering buying amid this economic turmoil.

| More on:
Value for money

Image source: Getty Images

Value investing is a lot more than just grabbing stocks that look inexpensive. The shares of an organization in permanent decline may appear cheap relative to sales, earnings, book value, or some other metric, but they are inexpensive for a reason. However, true value stocks provide long-term upside along with excellent margins of safety for investors.

The best value stocks are inexpensive because the market isn’t aware of its true potential. Sometimes, solid organizations, having the potential to bounce back after temporary setbacks, can be available at a dirt-cheap price as if the world is about to end. But, if the world doesn’t end, such value stocks can outperform the market for years.

Here are two of my top picks with this in mind.

Top value stocks: Alimentation Couche-Tard

Alimentation Couche-Tard (TSX:ATD) is a convenience store operator based in Canada, having a coast-to-coast presence across North America. This company also boasts a significant market share across many European markets as well.

Couche-Tard produced roughly 70% of its revenues and gross profit in the U.S. in its most recent fiscal year. Recently, the organization completed a global rebranding initiative under the Circle K banner. Couche-Tard appears to be well positioned to continue consolidating this fragmented industry. The company’s balance sheet is in great shape, even though it faced challenges in the current acquisition environment. Plus, it has ample opportunities for further consolidation. 

The industry is undoubtedly under quite a bit of pressure, with labour costs rising and cigarette sales facing a structural decline. However, I believe this organization can effectively offset all these pressures with its pricing model and scale. 

Though Alimentation isn’t a stock that investors grab for its dividend, there is undoubtedly a point worth noting.

This company has increased its dividends for the previous 11 years — a Canadian Dividend Aristocrat! Do not forget it has significant liquidity as well. Over the past five years, Couche-Tard’s quarterly dividend has increased from $0.045 per share to $0.11, implying a CAGR of approximately 20%.

All in all, Alimentation’s solid business model, supported by over 15,000 convenience stores and gas station locations worldwide, accounts for an intriguing investment thesis. 

Algonquin Power

Algonquin Power (TSX:AQN)(NYSE:AQN) is a diversified utility player with a mix of transmission, distribution, and generation assets. The organization produces most of its revenue (almost 95%) in the United States. Its two major business groups include renewable energy and regulated services.

Algonquin Power generates a majority of its profits from regulated utility services. Also, it has low commodity price exposure through inflation-indexed long-term PPAs (power-purchase agreements). 

Moreover, this organization has a lucrative near-term capital program. This is also bolstered by the company’s proven long-term strategy of acquiring underperforming assets.

The business model of Algonquin Power is both growth oriented (due to its renewables segment) and defensive (owing to its regulated utility exposure). This offers investors the right combination of defensive growth, value and income that’s immensely hard to find in the present market.

I expect Algonquin Power will grow its adjusted earnings in the high single-digit over time. Accordingly, investors banking on dividend growth have quite a lot to like about how Algonquin is positioned.

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 Chris MacDonald owns ALGONQUIN POWER AND UTILITIES CORP. The Motley Fool owns and recommends Alimentation Couche-Tard Inc.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »