A key advantage of investing in stocks for the very long-term is short-term volatility really doesn’t matter. Indeed, if you think a given stock or sector will be worth more in a couple decades, the price at which you acquire said stock really won’t matter in the near-term. That can be a dangerous way of thinking in some regards, since future returns are based on the price an investor buys a stock at. But over the very long-term, the acquisition price of a security matters less and less.
The thing is, in order for investors to realize these sorts of benefits from long-term investing, it requires picking actual compounders. That is, finding growth stocks that can continue to grow at market-beating rates, and provide increasing value over time.
In this article, I’m going to discuss my two top picks in this regard.
Shopify
Based in Canada, Shopify (TSX:SHOP) is one of the largest e-commerce platform providers in the world. The company’s platform is designed for medium and small-scale businesses, operating under two segments: subscription and merchant solutions. Shopify’s cutting-edge technology allows merchants to design, manage, market and sell their products and services efficiently, competing with the big boys in the sprawling e-commerce world.
In the third quarter of the 2023 financial year, Shopify reported impressive gross profit growth of 36%. The company’s total gross profit of $901 million is now within spitting distance of the $1 billion range, and many analysts and experts believe such a quarterly number is likely to become the norm this year. Overall, Shopify’s total revenue grew more than 50% year over year, leading to sales penetration of 15% in North America in 2023.
Those sorts of numbers are incredible. Additionally, Shopify’s global reach is nothing less than impressive. Approximately 0.5% of all global online transactions took place via a Shopify site. This means that, while the company has seen impressive penetration thus far, there’s still 99.5% of the market the company can go after. That’s a tremendous amount of growth potential moving forward, and it is what could fuel this company’s continued rise to new heights in 2024 and beyond.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is a Canada-based multinational operator of gas stations and convenience stores predominantly operating in North America, Scandinavia, Ireland, the Baltics, Russia, and Poland. The company also operates under the name Circle K in Malaysia, Egypt, and China. Couche-Tard focuses on rather simplistic business segments, increasing its reach and profitability via acquisitions in key markets over time.
This strategy has proven to be very profitable for Couche-Tard and its investors. The company recently reported $819.2 million or $0.85 per diluted share in net earnings for the second quarter of the financial year 2023. Couche-Tard continues to provide the kind of compounding growth investors like to see, evidenced by the move in the company’s stock chart above.
As of the time of writing, Couche-Tard’s market capitalization sits around $83 billion. However, despite incredible valuation growth over the past year, Couche-Tard’s valuation remains reasonable at only 20 times earnings.
If there was ever a Canadian stock to put in the “growth at a reasonable price” bucket, it would be Couche-Tard. For value-conscious growth investors, this remains one of my top picks on the TSX.
Bottom line
Overall, both Shopify Inc. and Alimentation Couche-Tard Inc. are two Canadian giants in their respective industries and have the potential to outperform the market in the long term. If Canadian investors invest in these companies for the next two decades, it’s almost assured that market-beating returns (in a favourable risk-adjusted fashion) are likely.
