Here’s a Top Stock I’d Buy as the Loonie Falls

Alimentation Couche-Tard (TSX:ATD) stock looks like a great buy as the loonie looks to be a wild mover.

| More on:

Image source: Getty Images

The loonie has been taking quite the tumble in recent weeks, thanks in part to the U.S. Consumer Price Index (CPI) report, which has stayed a tad lofty. At this juncture, it seems like a given that the U.S. Federal Reserve (America’s central bank) may not be so quick to act with its rate cuts. Indeed, some predict the Fed will cut rates three times this year.

With inflationary pressures persisting, though, I would not at all be surprised if we exit 2024 without a single rate cut from Fed chairman Jerome Powell. As much as he’d like to trim rates by a bit, I’m not so sure inflation will let him, regardless of how dovish he wants to be after the past few years worth of relentless rate hikes.

At the end of the day, it’s inflation that will grant the Fed to cut interest rates. And right now, markets are just starting to wake up to the reality that rates may have to stay at these heights for a while longer. Personally, I think the Fed is right to hit that pause button for a while longer, at least until what remains of inflation has been put away for good. At the end of the day, that inflation genie is really hard to put back in the bottle. And if central banks give the genie a chance to escape, we may find that the longer-term consequences could be more severe.

The loonie could face serious pressure

In any case, expect nothing short of volatility as expectations go from three rate cuts in the U.S. to one or even zero. Perhaps it’s better to be cautious and look to 2025 for the start of U.S. rate cuts. In any case, Canada may have the means to lead when it comes to rate cuts. The Bank of Canada may be holding off for now, but I think it will have a chance to act in the second half. As the rate cuts do come flowing in, while the U.S. stands pat, expect the Canadian dollar to take a further hit, perhaps a huge hit.

Undoubtedly, there’s no telling how low the loonie could fall as the Bank of Canada considers cutting rates while the Fed stays on pause mode. Though I don’t think the loonie will “crater” as some economists seem to think, I think it’s only prudent for Canadian investors to prepare for a potential move below US$0.70 over the next year or so.

So, with that in mind, it makes sense to check out some Canadian companies that do plenty of business south of the border.

Alimentation Couche-Tard stock: A great pick-up on a correction

There are many ways to play a weak loonie relative to the greenback. One of my favourite plays is Alimentation Couche-Tard (TSX:ATD), a company whose stock I’ve been pounding the table on amid its recent correction.

The company owns thousands of convenience stores across the U.S. market. The U.S. dollars earned from these American stores will be worth a heck of a lot more as the loonie continues its steady descent as the Bank of Canada looks to be the first to cut rates.

Of course, Couche-Tard reports in U.S. dollars, and the weaker value of the loonie could make the Canadian operations seem weaker. That said, the key point is that Couche-Tard does more business down south than up here in Canada. And with a solid presence in Europe, any weakness in the loonie versus the euro could bode well for the firm through the eyes of Canadian investors who translate the company’s earnings back into Canadian dollars.

Either way, I think Couche-Tard is an earnings growth superstar who will be doing well, regardless of how strong or weak various currencies are at any given instance. The important thing is the firm’s growth story is sound. In the meantime, though, Couche-Tard will surely not mind a somewhat weaker Canadian dollar.

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.

Fool contributor Joey Frenette has positions in Alimentation Couche-Tard. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool has a disclosure policy.

More on Investing

Happy family father of mother and child daughter launch a kite on nature at sunset
Investing

3 Soaring Stocks to Hold for the Next 20 Years

These three stocks are good bets for the long haul, given their healthy long-term growth prospects.

Read more »

grow dividends
Tech Stocks

Celestica Stock Is up 44% Since Earnings: What Investors Need to Know

Celestica continues to benefit from strong demand and production efficiencies, yet the stock remains undervalued.

Read more »

A plant grows from coins.
Investing

2 Dividend Stocks Paying 5% or More That Could Beat the Market in 2024 and Beyond 

Here are two top dividend stocks long-term investors may certainly want to consider for their yields and growth profiles right…

Read more »

edit Balloon shaped as a heart
Dividend Stocks

Love Value Stocks? 2 That Are Screaming Buys in May 2024

Patience can pay off by investing in these two value stocks with nice dividends and the potential to turn around.

Read more »

healthcare pharma
Tech Stocks

What’s Going on With WELL Health Stock?

WELL stock (TSX:WELL) made strong moves once again, with record earnings and even higher guidance for 2024.

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

2 Everlasting Canadian Stocks for Your RRSP

The Canadian National Railway (TSX:CNR) stock is worth owning for the long haul.

Read more »

money cash dividends
Stocks for Beginners

Is TD Stock the Best Dividend Stock for You?

Shares of TD stock (TSX:TD) plunged on the news of a money laundering probe. But could this mean it's a…

Read more »

exchange traded funds
Investing

New to Investing? Get Started With This Easy, Hands-Off Method

Vanguard S&P 500 Index ETF (CAD-hedged) (TSX:VSP) is a glorious first investment candidate for beginner investors.

Read more »