Navigating Bear Markets: A Top TSX Stock Proven to Outperform

Here’s a top TSX stock you can add to your portfolio today to expect market-beating returns.

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Canadian stocks have seen a sharp recovery in November 2023, as investors welcomed cooler-than-expected consumer inflation numbers. Easing inflationary pressures strengthened the idea that the Bank of Canada will not need to raise interest rates further, leading to a steep rally in stocks across sectors.

But the question remains: do investors no longer need to worry about the bear market?

While answering that question could be extremely difficult even for well-experienced investors, ongoing geopolitical tensions and a challenging consumer spending environment suggest that macroeconomic uncertainties could still continue to haunt investors, at least in the short term. This is one of the key reasons you may always want to hold some trustworthy stocks in your portfolio with a track record of yielding consistent returns. Such stocks could help you navigate tough bear markets and help you maximize your returns over the long term.

In this article, I’ll highlight one such top TSX stock you can buy today, which has years long track record of outperforming the broader market by a huge margin. And, more importantly, it can potentially continue to do so in the future due mainly to the underlying strength of its business model.

A top TSX stock proven to outperform the market

When you’re investing in a stock for the long term, it becomes even more important for you to carefully analyze its long-term growth outlook. While a company may manage to post strong financial growth for a few years due to various temporary factors, it may not maintain these growth trends for very long if the demand outlook for its products and services remains filled with uncertainties.

Speaking of a strong fundamental outlook, Dollarama (TSX:DOL) could be a reliable stock to consider, which has outperformed the broader market by a big margin in the last decade. It’s a Mont-Royal-headquartered company that operates a chain of value retailer stores across Canada. The firm currently has a market cap of $27.5 billion, as its stock trades at $98.25 per share with more than 24% year-to-date gains.

What makes this TSX stock so reliable?

The primary factor that makes DOL arguably one of the most reliable stocks to buy on the TSX today is its highly profitable business model that can continue to grow even in a weak economic environment. In fact, the demand for Dollarama’s affordable and value products tends to increase when inflation is diminishing consumers’ purchasing power.

Interestingly, Dollarama’s total revenue grew positively by 55% in the five years between its fiscal year 2018 and 2023 (ended in January). During the same five-year period, the company’s adjusted net profits also saw an impressive 54% increase.

In the quarter ended in July 2023 alone, Dollarama opened 18 net new stores to its already large store network. The company’s financial growth trends could improve further in the years to come, as it continues to expand its store network with each passing year, which could help this reliable TSX stock continue outperforming the market index.

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.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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