Value investing remains relevant despite the long-drawn inflationary environment. Regardless of market cap, many stocks trade below their intrinsic values in 2024. But if you’re looking for companies that will be worth more in the future, large-cap value stocks are the best buys.
Alimentation Couche-Tard (TSX: ATD), Nutrien (TSX: NTR), and Hydro One (TSX: H) are the top picks on the TSX today. The first two are powerhouses in their respective industries, while the third is Ontario’s largest electricity transmission and distribution service provider.
Industry champion
Alimentation Couche-Tard is a top-quality growth and value stock. This $75.9 billion company is the champion in the convenience store industry. The 44-year-old Canadian multinational company grew and expanded its geographic presence through acquisitions. At $79.64 per share, ATD is up by only 2.65% year to date. Market analysts’ high price target in 12 months is $124.11 (+55.6%).
In fiscal 2024 (12 months ending April 28, 2024), total revenue and net earnings dipped 3.6% and 11.6% year over year to US$69.3 billion and US$2.7 billion. Despite persistent inflation and continued pressure on consumers, Couche-Tard remains very optimistic about its business.
Feeding the future
Nutrien is the world’s largest fertilizer producer. The $33.1 billion company provides crop inputs and services to help growers increase and sustain food production. Its purpose is to feed the future with the growing global population and food consumption. The world-class fertilizer manufacturing assets are in North America, and the extensive distribution network efficiently supplies customers in over 50 countries.
The current share price of $66.23 (-9.43% year to date) is a good entry point, considering NTR’s 52-week high of $92.48. Market analysts’ 12-month average and high price targets are between $90.19 (+36.2%) and $109.10 (+64.7%). Investors also partake in the 4.42% dividend.
Nutrien boasts a global footprint and a leading retail business with 2,000 selling locations servicing growers and key agricultural markets. According to management, this competitive advantage should enhance shareholder value and return meaningful cash.
In the first quarter (Q1) of 2024, sales and net earnings declined 12% and 71% year over year to US$5.4 million and US$165 million. However, Nutrien sees a favourable outlook due to strong crop demand and the normalization of product margins. “We expect growth in retail earnings and fertilizer sales volumes compared to the prior year and have maintained our 2024 guidance ranges,” said its president and chief executive officer (CEO), Ken Sietz.
Strong fundamentals
Utility stocks are sensitive to interest rate movements. While share prices could drop when rates are high, fundamentals will not change, so you can buy on weakness. Hydro One trades at $39.89 (+1.99% year to date) and pays a decent 3.15% dividend.
The more than 110-year-old, $23.9 billion company distributes electricity to 1.5 million customers, mostly in rural communities. It also provides telecommunications support services for its transmission and distribution businesses.
Hydro One’s president and CEO, David Lebeter, said the company is more customer-focused now because of a refreshed corporate strategy and a definitive plan to build a modernized grid.
Buying opportunities
The current weakness of the large-cap value stocks is temporary. All three are excellent buying opportunities before the expected market upswing as inflation cools and the rate-cutting cycle continues.
