It’s all too easy to beat the TSX Index, but topping the S&P 500 is a difficult task, especially over a prolonged period. Indeed, as the old saying goes, if you can’t beat ’em, join ’em. That’s a major reason why index investing has been exploding in popularity over the years.
Though passive investing is hot among a wide range of new investors, I still think there’s ample value in picking your own stocks. Sure, you need to put in more effort, analysis, and market research when it comes to buying individual stocks to construct a personal portfolio. But the endeavour is worth it.
Even if you can’t top the S&P 500 consistently (it’s not easy to do), having a personal portfolio of hand-picked stocks is more personable. And it’s far easier to hold through turbulent environments, given you own company shares rather than an abstract basket of securities.
Though it’s harder to beat the market (or the S&P 500), I think investors who have the proper temperament and time horizon can impress themselves. Though I wouldn’t shoot to crush the market averages every single year (that could lead one down the route of speculation and gain-chasing), I would look to businesses that stand out as being “better” than your average S&P 500 constituent.
What constitutes as better than the rest?
Firms that have fairly projectable earnings streams and impressive growth stories.
Additionally, you should ensure you get into a stock at the right price because there’s never an excuse for overpaying, even for the most sought-after stocks in the market.
Without further ado, let’s check out one top TSX stock that I think has the means to outpace the S&P 500 over the next three to five years.
Alimentation Couche-Tard (TSX:ATD) is a convenience retailer that’s found a way to grow through most environments. It’s hard to find a firm that does growth by acquisition better than the Quebec-based retail giant. As the business of convenience changes, Couche-Tard’s managers have also shown a willingness to adapt. In other words, they can grow organically and pivot when technological trends (like the shift to electric vehicles) take off.
The future Circle K or Couche-Tard location could become more than just a place to pick up a quick read-to-eat item and a few grocery essentials. In a couple of years, the main draw to convenience stores will be fresh, ready-to-eat restaurant-calibre food. Fuel sales will probably become secondary.
One convenience retailer that Couche-Tard should strive to become is WaWa — a regional convenience store in the Eastern U.S. that has legendary hoagies and fresh food offerings. Personally, I’d be a fan if Couche-Tard acquired WaWa and replicated its delicious food model across some of its existing stores.
Either way, Couche-Tard has options, and it’s sure to exercise them carefully. At 19.24 times trailing price to earnings, the stock still seems way too cheap, given its growth prospects. Over the past year, shares have surged by around 29%. In 2024, I expect momentum to continue.
The bottom line
Between Couche-Tard stock and the S&P 500, my money is on the former. In addition to Couche-Tard’s steady growth profile, it’s also proven quite durable in the face of macro headwinds. All considered, ATD stock is a terrific long-term way to build wealth.