The broader markets have really taken a downward turn this August. And though September tends to be a pretty meagre month for stocks, I do think investors need not overreact. If anything, I view the latest slip in the S&P 500 as a good thing after such a hot summertime surge.
Subtle dips or mini-corrections, I believe, are a healthy part of a new bull market. Though the current market funk could drag into September or until that year-end Santa Claus rally, I’d continue to view stocks as the best investment to hang onto for the long haul, even though rates on risk-free assets continue to improve with time.
As valuations contract modestly going into late August, I’d look to pick up some of the hot growth stocks that may have cooled. One intriguing earnings grower that’s atop my watchlist right now is convenience retailer Alimentation Couche-Tard (TSX:ATD).
Indeed, the Canadian stock smashed past all-time highs this month. And though the stock could continue to retreat in sympathy with the broader markets, I’d treat any further dip as more of an opportunity than a sign to take profits and run.
At the time of writing, shares of Couche-Tard are still cheap at just north of 17 times trailing price-to-earnings, or 18 times forward price-to-earnings. Though convenience retail is a boring industry, Couche-Tard has found a way to grow its sales and earnings in an impressive fashion.
A low-tech growth darling
As a low-tech company, the stock hasn’t really benefited from multiple expansion, as so many AI-savvy plays have through the year. As markets begin to turn against growth and tech again, partially due to rising interest rates, it’s the low-tech companies that have moved higher on the back of solid earnings (as opposed to expanding multiples) that could plow through any sort of market pullback or correction to come.
At this juncture, Couche-Tard stands out as my top low-tech growth stock to consider for the rest of the year. At under $69 per share, I also consider the company a magnificent value for those seeking to get more for their investment dollar.
The company has grown to be valued at more than $67 billion through very smart deal-making in the convenience store space. Despite the relatively sizeable market cap, I still think Couche-Tard can keep the high-growth days going strong, provided it can keep getting good value for money from every deal (big or small) it chooses to go after.
When it comes to growth by acquisition, the price a firm pays is incredibly important. Fortunately, Couche’s managers can be trusted to make M&A moves if it’s to the benefit of its long-term shareholders. Though the recent pace of earnings growth has been impressive, it’s the long-term runway that has me most excited about punching my ticket, even as the stock flirts with new highs.
The Foolish bottom line
Couche-Tard is one of the stocks that you cannot dismiss as pricy simply because shares recently touched new all-time highs. The company has a proven growth formula, a strong balance sheet, and the know-how to keep the good times going for investors over the next 5-10 years.
Over the past five years, shares have more than doubled, clocking in 116% in gains. I think ATD stock is in for more of the same over the next five years, especially if the firm can get more active on the M&A front.
As recession and rate fears hit markets again, don’t expect Couche to crumble alongside the rest of the market. It has unique strengths that can help it make it through what could be a rough end to 2023.
