For the most part, 2023 was a tough year, as the aggressive interest rate hikes from central banks continued to slow down economic activity. However, a pause in key interest rate hikes from the Bank of Canada toward the end of the year saw the S&P/TSX Composite Index rally by 12.41% between October 27, 2023, and January 15, 2024.
The Canadian benchmark index appreciated by around 8% in 2023, with plenty of ups and downs before a rally in the last couple of months that carried into January 2024. While many stocks saw plenty of volatility aligning with the broader market, a few TSX stocks in 2023 delivered market-beating returns.
The January 16th announcement by the U.S. Federal Reserve Governor about interest rate cuts being slower than Wall Street anticipated saw the benchmark index go through a slight dip. Fortunately, the market beaters look set to continue negating the broader equity markets and outperform the rest of the market. Today, we will look at these two TSX stocks to see whether the holdings can do the same in 2024.
Constellations Software
Since the meltdown in the tech sector, investing in tech stocks fell out of favour for Canadians seeking growth through capital gains for safer assets in other sectors. However, not all tech stocks have underlying businesses with high-growth, high-risk business models. Constellations Software (TSX:CSU) is a Canadian tech stock that sets itself apart from others in the same sector on the TSX.
CSU stock is a $76.80 billion market capitalization tech company that develops and customizes software for public- and private-sector markets. It is in the business of acquiring, managing, and building vertical-specific businesses operating across several markets, from communications to hospitality, diversified across North America, Europe, Australia, South America, and Africa.
As of this writing, CSU stock trades for $3,624 per share, and it appreciated by 55% in 2023. Its share price seems quite expensive. That said, it has the potential to deliver solid long-term returns through more acquisitions that can give it exposure to the growing artificial intelligence integration trend that can drive more success.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is a $78.14 billion market capitalization Canadian multinational operator of convenience stores with over 14,300 locations across Canada, the U.S., Mexico, Ireland, Norway, and several other markets in Europe and Southeast Asia.
The company has been a market beater due to its innate ability to identify and make smart acquisition deals. While most companies go for a consolidation play to achieve growth, Couche-Tard only looks for deals when they are more likely to create a reasonable amount of value for shareholders.
While its merger and acquisition activities might have slowed down over the years, the company’s balance sheet has been a bright spot for the company amid rising interest rates.
Even as interest rates fall this year, Couche-Tard’s balance sheet can continue driving growth for the company. As of this writing, ATD stock trades for $81.30 per share. The stock appreciated by over 27% in 2023 and looks set to continue delivering market-beating returns in 2024.
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Foolish takeaway
While not without their risks, CSU stock and ATD stock have solid underlying businesses and business models that set the stage for market-beating returns this year. While the returns might not be similar to what we saw in 2023, these two stocks can be good holdings to have in your self-directed portfolio in 2024.
