If you’ve got an extra $2,500, it may be tempting to wait for the broader stock markets to pull back a bit after the S&P 500 recently made new all-time highs. Indeed, last week’s new highs for the top U.S. exchanges (Nasdaq 100 and S&P 500) were around two years in the making. And though momentum has really heated up in the tech scene (who would have thought that given the slow start for the mega-cap tech plays in the first week of January?), markets may still have a bit of room for a breakout.
Indeed, many bearish folks may question the valuations of stocks at these levels. While there’s no shortage of overvalued, bubbly plays out there, I’d argue that there are still plenty of undervalued ones that don’t get nearly enough coverage from the talking heads on television!
It’s never a good idea to time the market, whether you’re feeling good or bad about where you think the economy’s headed. Indeed, few folks would have expected the recent run-up in tech plays just two weeks ago!
So, if you’ve got an extra $2,500, just sitting around waiting to be invested, the following plays, I believe, trade at reasonable multiples right here, right now. And they’re some of the plays to hang onto, if not for a lifetime, for many decades at a time, given the width of their moats and the capabilities of their management teams.
Without further ado, let’s get right into the top stock I’d be more than willing to hold for decades.
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Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) quietly hit new highs, just north of the $81 mark recently. Despite the hot surge, shares still go for under 20 times trailing price-to-earnings (currently at 19.4 times). So, why the discount, despite the firm’s rich history of consistent earnings growth?
Indeed, there’s some uncertainty about how the firm, which owns many gas stations across the continent, will adapt as vehicles go electric. Personally, I think the electrification of vehicles is an opportunity for Couche-Tard to boost earnings growth, as it looks to keep patrons entertained while charging up their vehicles (which tends to take longer than filling up gas tanks). Indeed, fresh food can tilt the mix toward higher-margin offerings (like fresh food) over time.
Couche-Tard’s fresh food focus has paid major dividends in recent years. And the firm has all the reason to double down with a fancy restaurant play or the acquisition of a major grocer. In any case, Couche-Tard has so many options, with its massive cash and credit pile, even after the acquisition of Europe’s TotalEnergies assets. Too much cash and liquidity can be a good problem to have, especially in a world where rates remain quite elevated.
ATD stock may stay hot for some time!
So, where does ATD stock go from here? I think higher, as more investors appreciate the defensive growth the firm’s capable of. Also, management is among the best in the convenience retail scene, given their time-tested ability to create major value via mergers and acquisitions.
While I’d be bullish about any deal that Couche-Tard makes (even if they’re more convenience store deals), I’d be more intrigued if the firm were to acquire a grocer. I think it’s about time that the firm really went all-in on fresh food offerings. It’s a source of greater margins and growth as we move further into the electric vehicle age.
