2 Stocks I’ll Be Adding to My RRSP — Even With the S&P 500 at an All-Time High

Alimentation Couche-Tard Inc (TSX:ATD) is one stock I might add to my RRSP in 2024.

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The S&P 500 is near an all-time high. As of Wednesday’s close, it was at 5,160, just 1.8% below its highest level ever. Some disappointing inflation data led to a selloff in U.S. stocks Wednesday, but the overall market remained close to its all-time high.

Evidently, some investors think that stocks are too expensive, given the elevated inflation we’ve been seeing and have begun selling them. I agree with this to a very large extent: I spent the last few months selling most of my U.S. tech stocks, keeping only Alphabet, and transferring the proceeds I got from selling them into value stocks and Guaranteed Investment Certificates.

So, I’m largely in camp “overheated market.” Nevertheless, I see pockets of value in places. In this article, I will explore two stocks that I will likely be buying this year despite the fact that the S&P 500 is near an all-time high.

TD Bank

Toronto-Dominion Bank (TSX:TD) is a Canadian bank stock that I have owned on and off for five years. I first started buying it in 2019, and I kept buying it for a few years after that. In 2023, I sold most of my shares at around $83, and then when the stock fell to $78, I started buying them back again.

Why do I think I’ll be adding more TD stock to my Registered Retirement Savings Plan (RRSP) this year?

There are a few reasons.

One, TD is cheaper than most Canadian banks today. It trades at just 10 times earnings when most banks are hovering around 12. The last few months saw a rally in bank shares that TD largely didn’t participate in. The company’s last few earnings releases underperformed those of its peers, largely because the bank is still taking termination charges pertaining to its cancelled First Horizon deal. Those charges are one-time expenses, so TD selling off because of them does not appear to make sense.

Two, TD has had most of its merger and acquisition (M&A) related pain in the past. BMO and Royal Bank successfully closed their respective U.S. bank deals and are going to be taking integration charges for years to come. TD had one deal shot down by U.S. regulators (First Horizon) and had another one go through successfully over a year ago (Cowen). So, its M&A integration charges are in the past now. That’s not the case for the other two banks named, which are still in the process of integrating their acquired companies.

Alimentation Couche-Tard

Alimentation Couche-Tard (TSX:ATD) is a stock I have never owned, but am strongly considering buying for the first time. As a gas station company, it profits off the high oil prices being observed these days, but unlike oil companies, it does not require high oil prices to be profitable.

In addition to fuel, ATD sells food, cigarettes, lottery tickets and other such items at its stores. It can do well even when oil and gasoline prices are low. So, it’s a play on higher oil that is not a pure play on it.

Also, ATD’s management has an excellent track record of exercising fiscal discipline and re-investing profits back into the company. This fact has resulted in ATD having a pretty low (1.1) debt/equity ratio, despite having done a massive expansion over the last decade.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Andrew Button has positions in Alphabet and Toronto-Dominion Bank. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Alphabet. The Motley Fool has a disclosure policy.

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