2022 has been a challenging year for Canadian growth stock investors. Macroeconomic concerns about inflation, interest rates, supply chain challenges, and geopolitical risks have caused investors to abandon many of Canada’s most innovative and fast-growing businesses.
Certainly, the rapid rise in growth stocks in 2020 and 2021 was an overreaction. Valuations became unreasonable, and the market was flush with speculation. It alarmed even the most seasoned investors.
Forget gambling: Become a “forever” investor like Buffett
At the Berkshire Hathaway Annual General Meeting, Warren Buffett slammed Wall Street brokers by stating: “Wall Street makes money, one way or another, catching the crumbs that fall off the table of capitalism … They make a lot more money when people are gambling than when they are investing.”
Unfortunately, there was a lot of gambling in 2021. Now, the stock market has reacted in the opposite direction. It has crashed more speculative, unprofitable growth stocks.
Plenty of top Canadian growth stocks trading at a discount
At the same time, some of the best businesses in the world have also been slammed, many of which are trading with attractive valuations and equally impressive long-term growth prospects.
While the current stock market is ugly, there are plenty of opportunities if you can invest for years and decades. Here are two top Canadian growth stocks that are perfect to just buy and hold for forever from here.
Brookfield Asset Management: A portfolio diversifier
Brookfield Asset Management (TSX:BAM.A)(NYSE: BAM) has provided solid, relatively low-risk returns for years. This is a great Canadian stock because of its diversified, alternative investment platform. It manages operations in renewable power, real estate, infrastructure, private equity, specialty debt, and insurance.
Over the past 10 years, this Canadian stock has returned 354%. That is a 16.3% compounded annual total return. That doesn’t include spinouts (there have been several) and dividends.
While there is a lot of economic gloom, that is a great opportunity for Brookfield. It buys assets in a contrarian manner. When the economy is bad, it utilizes its strong balance sheet to sweep up assets at bargain-bin prices.
This Canadian stock trades at a considerable discount to its intrinsic value and only 14 times adjusted funds from operation (its core measurement of cash generation attributed to shareholders). Considering this, now is a perfect time to pick up this growth stock for the long term.
Alimentation Couche-Tard: A Canadian stock for the long term
Another Canadian stock to buy and hold for the long term is Alimentation Couche-Tard (TSX: ATD). It may not be a flashy tech stock, but it has grown at an incredible 23.6% compounded annual rate over the past 10 years. That equals a 735% return!
Couche-Tard operates and acquires gas stations and convenience stores across the world. It is a boring business, but the company is very efficient with its use of cash. Its business generates a lot of excess cash, and the company has been buying back a lot of stock.
While its pace of acquisition growth has slowed, there are rumours that it is eyeing several larger targets this year. Regardless, the company has attractive opportunities to grow and create value from its current operations (more product offerings, EV charging stations, and new locations).
With an enterprise value-to-EBITDA ratio of 11 times, the stock is not cheap, but it is not at a premium either. For a company with a great track record, strong management, and attractive internal rates of return, this a great Canadian growth stock to buy and hold forever.
