While it’s unrealistic to expect 2023-esque returns in the new year, I do think value investors stand to do well as the rally begins to broaden out, rewarding sectors beyond tech. Indeed, the financials and energy scenes are two areas that I think could be in for a great year. Though it remains to be seen how the two underrated sectors stack up against tech (and its AI appeal) in 2024, I can’t help but think the risk/reward is close to the best it has been in many quarters. Catching falling knives isn’t every investor’s cup of tea, however.
The good news is that there are market beaters on the TSX Index that could pull off another year of impressive performance as the great American bull continues to roar. In this piece, we’ll check out two stocks that I think may just be able to keep the good times going in 2024 and beyond.
Without further ado, consider shares of convenience store firm Alimentation Couche-Tard (TSX:ATD) and software top dog Constellation Software (TSX:CSU) as potential winners that could keep on winning for years to come.
Couche-Tard is a convenience retailer that has a knack for growing its bottom line via smart acquisitions. Unlike most other consolidators (or roll-up plays), Couche-Tard seems to only make deals when they have a good shot at creating a reasonable amount of value for shareholders. Undoubtedly, the pace of M&A has slowed in recent years. But all the while, the balance sheet has continued to shine brightly as interest rates began to rise.
Even as rates fall off a bit in 2024, I view Couche-Tard’s balance sheet as a unique source of strength. Remember, Couche-Tard has a lot to gain as it looks to expand at home and abroad. Over the next decade, I’d look for Couche-Tard to continue bolstering its European presence while keeping watch on opportunities in other parts of the globe (perhaps the Australasian region).
At writing, shares go for just shy of $78 per share. With a 18.8 times trailing price-to-earnings multiple, shares seem fairly valued. That said, I think earnings could continue to rise from here, especially if a recession never materializes in the new year. If you like shrewd management teams and predictable earnings growth profiles, it’s tough not to love Couche-Tard, even as it looks to make new highs again.
The stock may be up 29% year to date, but I think similar returns could be in the cards for 2024, especially if consumers don’t tighten the purse strings as much as some bears expect.
Constellation Software is another company that’s been profoundly successful with its M&A strategy over the years. Constellation knows the smaller-cap part of the Canadian software scene like few others. It’s the company’s excellent managers and venture capital-like vibe that make many more than willing to pay the premium price tag.
The stock looks expensive at almost $3,300 per share. It’s also near a new high, but the stock may not be as frothy as it appears on the surface. Not if the company can continue to make smart deals in the age of artificial intelligence (AI). There are plenty of great startup tech firms that could use AI as a way to break into new market segments. And Constellation likely has its sights set on more than a few!
Even after surging nearly 55% year to date, I still wouldn’t take profits going into 2024. Not with all the long-term momentum behind it. Seldom do you get shares of CSU at a compelling discount. Though the stock’s a better buy on a pullback, I’d not be afraid to buy a quarter position to close out the year!