3 Hot Canadian Stocks That Could Keep Beating the TSX Index

Investors should take a closer look at Waste Connections (TSX:WCN) and two other intriguing stocks for the long haul.

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It’s been a pretty hot summer, especially for various Canadian stocks that recovered much of the ground lost during a choppy 2022. In this piece, we’ll highlight three high-momentum Canadian stocks that could continue to outpace the broader TSX Index over the next two to three years.

Undoubtedly, momentum investing is not everybody’s cup of tea. That said, I view the following companies as having potential catalysts that could keep the great days going. So, without further ado, please consider the following three steady earnings growers that I believe should trade at a considerable premium to the market as they head into the late days of summer!

Constellation Software

We always hear about America’s big-cap tech stocks these days, especially after their glorious rebound off last year’s lows. Still, it’s not all about Jim Cramer’s prized “Magnificent Seven” tech stocks that are deserving of investors’ respect. In Canada, Constellation Software (TSX:CSU) is a tech star that may very well be as good as the best innovators south of the border.

The stock recently slipped around 4% from its new all-time high on the back of weakness in the tech scene. I think the dip is a gift rather than a sign to run for the hills.

Of course, Constellation stock does not come cheap right now at over 83 times trailing price-to-earnings, or just north of 34 times forward price-to-earnings. The company is growing earnings and could continue to take advantage of opportunities in the Canadian software scene should tech turmoil returns. Either way, Constellation seems ready to keep shooting for the stars.

Over the past year, the stock is up an impressive 23.3%. Over the past five years, shares have nearly tripled, up 186.6%. Impressive results that warrant the attention of young investors.

Waste Connections

Waste Connections (TSX:WCN) is a boring albeit very profitable business. The company also has a wide moat and tends to be less rattled by day-to-day, market-moving news. Simply put, Waste Connections doesn’t need a strong economy to do well for itself. Waste is generated in all sorts of economic climates, after all.

Of late, the stock’s less hot than Constellation, up around 5.7% year to date. Over the past five years, shares are up 82%. That’s an impressive return from a business that can only be described as boring! Boring can be beautiful, though, especially when the market waters encounter winds of recession.

At 43.6 times trailing price to earnings, WCN stock isn’t cheap. Still, how many companies can offer defensive earnings growth year after year with a cheap multiple? In that regard, I view WCN stock’s price as pretty fair for what you get!

Alimentation Couche-Tard

Speaking of boring but profitable businesses, check out convenience store company Alimentation Couche-Tard (TSX:ATD), which came off a new high last week, just shy of $70 per share. Undoubtedly, not much news drove the latest spike higher. Perhaps investors are starting to appreciate the earnings grower for what it’s worth. The stock’s going for under 17 times trailing price to earnings, despite recent growth that I consider to be worth a much higher multiple.

Couche-Tard has a great business model, and I don’t think the best days are in the rearview. To the contrary, I think the company can keep the bottom-line beats coming, as it continues to pursue smart deals while driving sales and earnings growth in impressive fashion.

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. 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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