Rate-Hike Recession Fears? 1 Top Stock for Your TFSA Retirement Fund

Alimentation Couche-Tard (TSX:ATD) is a cash-rich consumer staple stock that could help investors shelter their TFSAs from rampant market volatility.

| More on:
Businessperson's Hand Putting Coin In Piggybank

Image source: Getty Images

Your TFSA (Tax-Free Savings Account) is meant to hold some of your best long-term investment ideas. Even if you’ve avoided chasing high-multiple momentum stocks and the “growth-at-any-price” trade, your TFSA is probably feeling a bit down these days. The broader markets have been absolutely vicious to everybody, including those who diversified properly. Though it may take a bit of time for your TFSA to recover after a terrible first half of 2022, I think that beginners should treat the recent turbulence as nothing more than an opportunity to top up their portfolio.

Warren Buffett was busy buying up stocks in the first quarter of 2022. The man is likely relishing the opportunity to pick up even more shares of his favourite businesses at even better prices. Undoubtedly, Buffett was more than ready for a bear market moment, with so much cash on hand and a list of businesses at prices he’d be willing to buy.

Top up your TFSA with stocks you know to be cheap

As markets fall further into correction (or bear market) territory, investors should do the same. They should have a shopping list and be ready to buy once their desired price target is reached. Indeed, many market darlings have come a long way since peaking out in the back half of 2021. Though it’s hard to tell when the growth trade will heat up again (it’s unlikely until rates and inflation show signs of peaking), I think many dividend stocks have been babies thrown out with the bathwater.

Instead of catching a falling knife, hoping for a sharp bounce, you should look at what you know to be cheap. That means insisting on real fundamentals, cash flows, and resilient growth profiles.

Alimentation Couche-Tard (TSX:ATD) is one of the few Canadian stocks that fit the bill as being cheap in the face of a broader market selloff.

Alimentation Couche-Tard

Couche-Tard is the Quebec-based convenience store giant that we all know and love. The firm, which is behind banners such as Circle K, has found success growing via M&A in the past. Over the past few years, acquisitions and dispositions have slowed.

However, management has been busy driving same-store sales growth (SSSG) via the inclusion of fresh food and private-label merchandise, among other efforts to drive per-store sales and earnings higher. Organically, Couche-Tard has done incredibly well. The firm has found the sweet spot with fresh food and margin-driving private-label goods.

The firm seems more than willing to double down on fresh food and other grocery items, as demonstrated by the acquisition attempt of French grocery company Carrefour. The deal was shot down quickly, but Couche-Tard’s interest was clear.

With a strong cash position, Couche can go about M&A at different angles. Global convenience store chains or a grocer could be in the cards at some point over the next five years. In any case, don’t count on Couche-Tard to rush. Its managers are disciplined enough to walk away if it can’t find the right deal at the right price.

With Petro-Canada locations up for grabs, look for Couche-Tard to make a potential offer that could be rich with synergies. Indeed, cash is king as rates rise. As valuations sink, look for Couche to take advantage of opportunities across the board.

The bottom line for TFSA investors

As a recession-resilient consumer staple with a very modest 16.7 times earnings multiple, it’s not a mystery why shares have been left standing amid the recent bumps experienced by broader markets.

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 has positions in Alimentation Couche-Tard Inc. The Motley Fool has positions in and recommends Alimentation Couche-Tard Inc.

More on Investing

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

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 »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

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 »