SPY Stock Moving Too Slowly? Add These Canadian High-Flyers

Canadian stocks like Constellation Software (TSX:CSU) are flying high.

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The SPDR S&P 500 ETF Trust (NYSE:SPY) is one of the most popular stock investments in the world. An S&P 500 index fund, 82 million shares of it exchange hands every single day. The SPY is a pillar of the “passive index fund” investment strategy, and it has a legion of investors holding it for life.

If you’re looking to minimize the risk in your portfolio, you’d do well to hold a bit of SPY in it. The fund has an extremely low fee (0.04%), is highly liquid, and owns some of the best companies in the world.

With that said, there are limits to what can be achieved with index funds like SPY. Because they’re so diversified, they don’t deliver the kinds of explosive growth that individual stocks sometimes do. For the most part, investors in individual stocks don’t experience that kind of growth either. Some do, though, and it’s not wrong to take a shot at it with a small percentage of your portfolio. With that in mind, here are some Canadian high-flyers that have been performing better than SPY.

Alimentation Couche-Tard

Alimentation Couche-Tard (TSX:ATD) is a Canadian gas station company. It is best known for operating the Circle K gas station chain, which it acquired from ConocoPhillips in the 2000s. Ever since acquiring Circle K, ATD has been expanding the franchise across Canada. Today, Circle K locations are common nationwide.

Alimentation Couche-Tard has outperformed SPY over the last decade. In that period, ATD is up 510%, and the SPY is up 253%. A pretty good showing from both, but ATD takes the cake. It shouldn’t be surprising that ATD went up a lot in the 2013-2023 period. The 2010s was the decade in which Alimentation Couche-Tard was expanding Circle K all over Canada. The growth in that period was very rapid, hence the market-beating return.

Can ATD keep it up?

Potentially, yes. Despite its aggressive growth strategy, Alimentation Couche-Tard has never borrowed excessive amounts of money to grow. Instead, it has re-invested large amounts of its earnings into growth. So, it has achieved growth without hurting its balance sheet. Today, it has a 0.47 debt-to-equity ratio, which implies that it is not very indebted relative to what it owns.

Constellation Software

Constellation Software (TSX:CSU) is a Canadian software company that operates on a venture capital-like model. It buys up smaller software companies and then integrates them into its own business. Its deals are usually pretty small, being valued at $5 million to $10 million. Nevertheless, they have made a big difference to CSU’s overall results, as the stock has risen 14,190% since its initial public offering in 2006.

How is Constellation Software doing these days?

Pretty well, it would seem. In its most recent quarter, the company delivered the following:

  • $1.92 billion in revenue, up 34%
  • $94 million in net income, down 4%
  • $233 million in operating income, up 8.8%

The earnings release beat analyst expectations on revenue, although it missed on earnings. It was a mixed showing, but with a vast collection of profitable businesses, CSU should be able to perform adequately in the years ahead.

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 Andrew Button has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

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