Even if the TSX Index is bound to drag over the next year, self-guided investors should continue to stay the course and pursue bargains when they come to be. Indeed, a bear market can really drag on for years. And if we are headed for another sustained move lower, the patience of all investors, big and small, will be put to the test.
Indeed, whenever stocks do nothing for many quarters or even years, it’s tempting to give up on stocks. Why bother with stocks when you can get a perfectly good 5% rate from a Guaranteed Investment Certificate (GIC) at your local financial institution?
Indeed, there are not only alternatives to stocks these days, with rates staying high, but there are some pretty great alternatives in the risk-free world. And they could get even more enticing with every upward move in rates. In any case, I think stocks still top bonds or GICs over the long run, especially if you’re a value investor with a nose for value and the willingness to buy as others sell.
Let’s check out three market beaters that I think could do well from here, regardless of where the TSX Index ends up a year or two from now.
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Fairfax Financial Holdings
Fairfax Financial Holdings (TSX:FFH) has been one of Canada’s best performers since the depths of the 2020 market plunge. In the last two years, the stock has more than doubled, surging around 120% over the timeframe. At close to fresh highs just shy of $1,200 per share, the stock looks pricy but is actually quite cheap.
Indeed, Prem Watsa, the man behind the scenes at Fairfax, deserves a round of applause for his firm’s comeback. It’s not just smart investments that the firm has made over the years but a fundamental improvement in underwriting that could help drive higher margins and continued profitability, even in today’s rough market environment. The Canadian Warren Buffett is back. And it’s probably not too late to gain exposure.
In a year from now, my bet is that FFH stock will be above $1,300, even if Canada grapples with negative gross domestic product numbers.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is a convenience store consolidator that has also delivered a respectable performance in the last two years, rising 58% over the timespan. Despite flirting with highs again, the stock isn’t yet overvalued — far from it. The stock goes for just 17.9 times trailing price-to-earnings, which doesn’t do the defensive earnings-growth profile much justice.
I think the market could keep rewarding Couche-Tard for its strong balance sheet and its proven ability to drive cash flows higher in even the choppiest of conditions. Additionally, the management team stands out to me as one of the best in all of Canada. The firm still has its founder’s values ingrained in corporate culture. And I think that means more big gains to come for many years as top bosses run the business as their own.
TFI International
TFI International (TSX:TFII) is another low-tech company that’s been clocking in impressive results. The stock’s up more than 30% in the past two years. Moving forward, I think the trucker could be headed for even higher highs, even as economic pressures dampen volumes.
At the end of the day, TFI moves goods from the origin to the endpoint. And its services could experience a sharp uptick in demand once the economy is ready to return to form. At 17.3 times trailing price-to-earnings, shares look deeply undervalued. The 1.11% yield is a nice bonus!
