Quebec is home to some truly wonderful businesses flying under the radar of most Canadian value investors. In this piece, we’ll look at two “Quebec” stocks that are at (or around) fresh all-time highs. Such names have been incredibly resilient through 2022. Even as the recession moves its way through the economy, I think each name is resilient enough to continue marching higher.
At the end of the day, you want the truly “wonderful” businesses at discounts to what you think they’re worth. Leave worrying about the state of the economy and exogenous factors you can’t control to others.
Couche-Tard
Alimentation Couche-Tard (TSX:ATD) has quietly broken out to a new all-time high in the $65 range. Undoubtedly, the Canadian convenience store powerhouse has been on a steady upward ride over the past few years. Over the past two years, shares are up nearly 70%. Those are impressive gains, likely due to the firm’s impressive footing amid higher rates. The balance sheet is incredibly strong, and the management team hasn’t been itching to pull the trigger. They’ve been patient, and now their cash hoard is worth that much more in a world where valuations are a tad cooler.
I think Couche has some of the best managers in the business. They know that the act of mergers and acquisitions (M&A) doesn’t build value, unless sufficient synergies can be created to justify the purchase price. With plenty of cash building up and a world of potential M&A targets, the tables seem to have turned in Couche’s favour in a major way. Add an extra emphasis on value and actual profitability over “sexy” growth stories or the “growth at any price” trade, and it’s apparent why Couche is a much-loved stock in this market again.
I have no idea when Couche will announce its next remarkable deal. However, I think there’s a very high chance that such a deal will be value creative. In the meantime, Couche has shown it’s more than capable of driving growth in hard times inorganically.
Sure, 17.1 times trailing price to earnings (P/E) is a bit higher than where the stock spent most of the past few months. However, I’d argue the stock is still a great deal right here. It’s a winner that I think will keep winning through 2023. The firm has a plan and the liquidity to keep on growing profitably.
CGI
CGI (TSX:GIB.A) is a tech company that doesn’t get as much credit as some of the high flyers south of the border. Though CGI isn’t exactly an awe-inspiring growth play, it is a firm that’s capable of growing profitability through difficult environments. The stock is up around 19% over the past year and is near a fresh new all-time high.
The Quebec-based IT and consulting firm also has excellent managers that know how to mitigate risks effectively. Amid the tech carnage, CGI has played a critical role in helping its clients trim their budgets without having to resort to mass layoffs.
In a “tighter” tech environment, CGI’s services could experience steady demand. Given this, I view the 20.15 times trailing P/E multiple as way too low, given the type of low-beta (0.86 beta, implying slightly less correlation to the market) gains we’ve come to expect from the name.
