A recession may very well be unavoidable as we sail into 2024, with a wide range of things to worry about. From rising interest rates to geopolitical tensions, there’s no shortage of things to bite your nails over. And though a soft landing may be wishful thinking, I believe that investors should position their Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios in a way that can weather any storm.
Even if a soft landing hits and the TSX Index is ready to make up for lost time after more than a year of choppy, sideways trading, I think it’s wise to be ready for anything this rocky market throws at you.
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The case for sticking with Canadian stocks amid the stock market’s brutal slump
Indeed, a hard landing for the economy could drag the TSX Index, S&P 500, and Nasdaq 100 down much lower. However, I’d argue that in such a down market, the TSX Index, which is full of value, may be able to outperform the U.S. stock market averages. And if you can snag discounted stocks on the way down, you may be setting yourself up for a glorious rally on the other side of a recession or mild slowdown if that’s what it’ll be limited to.
Add the horrid exchange rate (the loonie is now worth US$0.725), and it makes a lot of sense to stay domestic with your next round of purchases amid this horrid correction in broader markets.
Now, buying the dip is never easy, especially when the bears emerge from hibernation and the doomsayers give their opinions on where stocks will head from here. Further, geopolitical tensions could continue to act as a heavy weight on the economy.
In any case, one has to imagine that such negativity is already factored into today’s slate of valuations. Remember, we’re going through a rough patch following a partial recovery that didn’t even take us to new market highs. Indeed, the failed recovery of the broader markets doesn’t have to mean stocks are headed back to last year’s lows.
In any case, here is one Canadian stock that I think can end 2024 higher, even if a mild recession finally does end up happening.
Alimentation Couche-Tard: Putting the markets to shame, even as recession risks rise!
Alimentation Couche-Tard (TSX:ATD) isn’t just a high-quality consumer staple to batten down the hatches for a recession year. The convenience store consolidator has what it takes to leave the rest of the market behind, as it looks to drive earnings growth with the perfect cocktail of mergers and acquisitions (M&A) and organic initiatives (think merchandising).
Amid inflation, Couche-Tard’s private label has really shined. And whatever is up next (recovery or recession), the firm seems focused on the truly long term. It has a five-year plan, and I have no doubt that management will live up to the targets it’ll set for itself.
For Couche-Tard, it’s focused on what it can control. As the lights go out on the economy, look for Couche-Tard to get more active on the M&A front, as it looks to deploy its financial firepower on a potentially needle-moving deal.
In prior pieces, I praised the firm for its liquidity (US$10 billion or so in acquisition power) and discipline, both of which, I believe, give Couche-Tard plenty of options in a sluggish economy. In a soaring rate world, cash is king. And there’s no shortage of cash and cash flow when it comes to the firm.
Bottom line
Even with shares nearing new highs again, I continue to believe it’ll continue its market-beating ways. The stock is up nearly 23% year to date versus the TSX Index, which is down 2% over the timespan.
I’m a raging bull on Couche-Tard’s and its five-year roadmap.
