The broader stock market is really starting to heat up in 2024, with tech taking front and centre stage again, with hopes for lower rates over the near future. Rates may not be headed for a nosedive anytime soon, not given the lingering threat of inflation. However, from a long-term perspective, it does seem like rates are bound to normalize and take many backward steps as inflation is stomped out and next-generation generative artificial intelligence (gen AI) drives productivity across a broad range of industries.
Indeed, AI has inflated various parts of this market (look no further than the semiconductor scene, folks). However, I believe gen AI is a transformative technology that could drive corporate earnings higher, perhaps at a shocking rate, as gen AI models continue to improve rapidly. It’s a profound technology that could prove quite disruptive and potentially disinflationary.
If gen AI does drive inflation lower, perhaps to negative territory (deflation), I’d argue rates could face downward pressure for an extended period. In such a scenario, momentum stocks with promises of next-level growth may still be worth pursuing, especially if you’re a new investor with the risk tolerance!
In this piece, we’ll look at two great companies that I believe can stay hot in 2024, as they look to keep the pace of growth going strong through a period of macroeconomic headwinds.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is a convenience store operator and consolidator that’s seen an enviable amount of earnings growth in recent years. As the firm looks to modernize, I believe there’s a huge opportunity to take share, not just away from other competing convenience stores but from retailers at large, especially those in the realm of grocery.
Couche-Tard may not be able to compete step by step in grocery retail. However, I believe it can do well as it focuses more on fresh food (think the items not in the middle aisle of the grocery store). With a fresher focus and perhaps yummier meals in the frozen food section, I think it’ll be tough to stop Couche-Tard.
In a prior piece, I’d noted that acquiring regional convenience store chains like Sheetz and Wawa made a ton of sense, given they’re already ahead in the game when it comes to freshly prepared foods ordered to go. Whether we’re talking about customized salads made in-store, pizza, or delicious subs, Couche-Tard could certainly use a bit of innovation as it looks to wander well beyond chips and pop and toward something you’d come to expect from a restaurant.
Constellation Software
Constellation Software (TSX:CSU) is another proven market beater that blew away investors over the past few years. The stock recently melted up after having appreciated nearly 13% year to date (it’s just been one-and-a-half months!). Of course, the tech tailwinds have helped give CSU stock a bit of a jolt. But as the firm starts taking gen AI seriously, I think it could have the means to rally higher.
Nobody knows the smaller-cap Canadian software industry better than Constellation. And if it can unearth the next big AI gem from the small-cap universe, I think CSU stock could enjoy many more days of next-level growth as it chases down the $100 billion market cap milestone. I think it’s just a matter of time before CSU stock breaks the mark.
