Investing in the stock market can be quite tricky, given the volatility associated with this asset class. It’s essential to consistently identify companies that can deliver outsized returns and thrive across business cycles.
Here are three such stocks I think every Canadian should own in 2024.
Microsoft stock
Valued at a market cap of over US$3 trillion, Microsoft (NASDAQ: MSFT) is the largest company in the world. It leads several growth markets, enjoying a 72% share in the desktop operating system market and a 23% share in the public cloud segment. Additionally, Microsoft’s 365 software suite enjoys high engagement rates while it also dominates the gaming segment with the recent acquisition of Activision Blizzard.
Despite its massive size, Microsoft’s growth story is far from over. Analysts covering the tech giant expect the company to increase sales from US$212 billion in fiscal 2023 (ended in June) to US$280 billion in fiscal 2025. Comparatively, adjusted earnings are forecast to expand from US$9.81 per share to US$13.36 per share in this period.
Priced at 31 times forward earnings, MSFT stock might seem expensive, but a quality growth stock commands a premium valuation.
Additionally, Microsoft enjoys an early mover advantage in the highly disruptive artificial intelligence (AI) segment, a market that is forecast to surpass US$700 billion by 2030. Microsoft has a sizeable stake in OpenAI, the creator of ChatGPT, one of the most popular generative AI platforms in the world.
Alimentation Couche-Tard stock
Valued at $72 billion by market cap, Alimentation Couche-Tard (TSX: ATD) is a convenience and mobility leader with more than 16,700 stores in 29 countries.
The TSX stock has crushed broader market returns by a wide margin, rising close to 400% in the last 10 years on the back of solid earnings growth that has expanded by over 406% in this period.
ATD recently closed the acquisition of 2,175 sites from TotalEnergies for US$3.8 billion. These retail assets are located in Germany, Belgium, the Netherlands, and Luxembourg, allowing ATD to gain traction in multiple European markets.
Moreover, ATD expects synergies associated with the acquisition to reach US$187 million in the next five years. Priced at 19 times forward earnings, ATD stock trades at a 15% discount to consensus price target estimates.
Constellation Software stock
The final stock on my list is Constellation Software (TSX: CSU), a Canadian tech heavyweight with a market cap of $77 billion. Constellation Software acquires, manages, and builds vertical software companies. It identifies profitable software companies that offer mission-critical services to enterprises, resulting in high customer engagement and retention rates.
In 2023, it deployed $2.6 billion towards acquisitions, allowing the software leader to increase sales by 27% year over year to $8.4 billion. Moreover, its free cash flow rose by 36% to $1.16 billion.
Constellation Software is on track to end 2028 with adjusted earnings per share of $260, given consensus price target estimates. So, if CSU stock is priced at 30 times forward earnings, it might trade around $7,500 per share in April 2028, indicating an upside potential of over 100% from current levels.
