Navigating Rising Interest Rates: Top Canadian Stocks to Watch

Here are two of the top Canadian retail stocks investors may want to consider buying, despite these uncertain economic times.

After the hard hit by the covid-19 pandemic, the Canadian market has now recovered quite significantly. According to the latest Organisation for Economic Co-operation and Development data, Canada’s economy experienced a growth of 3.2% in 2022, beating country averages. However, the country still faces post-pandemic challenges, including looming inflation, sluggish investment, and limited productivity growth. 

Experts from a leading Canadian bank suggest Canada is likely to experience at least a “mild” recession, although the bank now expects that the decline in gross domestic product will begin during the third and fourth quarters of 2023, which is later than it previously expected.

If you are thinking about investing in stocks, here are the two of them that can help you navigate during these uncertain periods. 

Canadian Tire 

Canadian Tire (TSX: CTC.A) and Microsoft (NASDAQ: MSFT) have joined forces in a seven-year strategic retail partnership to revolutionize Canada’s retail sector and drive technological advancement in the country. 

Leveraging Microsoft Azure, CTC will modernize its systems, improve customer experience and accelerate business operations across its entities. Microsoft will serve as CTC’s primary cloud provider, enabling flexibility, scalability, and data-driven growth. In addition, CTC will gain access to Microsoft’s digital expertise and foster innovation and talent development. 

Another notable collaboration includes a multi-year financial partnership between Canadian Tire and the Professional Women’s Hockey League (PWHL) to promote women’s professional sports and promote responsible innovation driven by artificial innovation in retail. PWHL with teams in Montreal, Ottawa, Toronto, Boston, Minneapolis-St. Paul, and New York City will begin to play in January.

From a fundamentals standpoint, Canadian Tire remains my top retail stock pick, and for good reason. This company continues to provide cash flow growth and return capital to shareholders via rising dividends over time.

Dollarama 

Dollarama (TSX: DOL) is a thriving Canadian retail chain that demonstrates unwavering demand for essential and affordable products even in challenging economic times. 

In the first half of 2023, its sales rose 20.1% year on year to $2.8 billion, owing to its store expansion. Adjusted earnings rose 29.6% to $1.49 per share. 

Also, analysts predict global acquisitions to fuel future growth, leveraging the company’s adaptability, strong cash generation and high return on invested capital. Speculation surrounds Dollarama’s interest in acquiring The Reject Shop, suggesting a strategic expansion. 

The retail store’s short-term performance depends on existing market growth, supported by robust cash flows and a resilient balance sheet, making it a stable investment choice in a dynamic retail environment.

Bottom line 

Both of these stocks have a strong history of performance and have delivered significant returns to their investors over a significant period. Hence, if you have long-term investment goals and want to add stocks that will offer resistance against rising interest rates, these two are must-haves. 

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends Microsoft. The Motley Fool has a disclosure policy.

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