Canadian investors thinking about putting some money to work after a rough Tuesday should look to some of the battered Canadian growth plays that sunk alongside the tech-heavy Nasdaq 100. Indeed, Tuesday’s session was pretty ugly for the TSX Index, as Canadian stocks caught up to the damage that was caused to global markets yesterday. Although it’s an uneasy time to go for growth, I think the more turbulent ride may be worthwhile for investors willing to keep on riding the rough waves.
Undoubtedly, U.S. presidential election jitters and the recent volatility arising from Japan could make for a treacherous finish to 2024. That said, long-term Canadian investors should stay the course with their TFSAs (Tax-Free Savings Accounts) or RRSPs (Registered Retirement Savings Plans), as it’s the long-term game that could yield the greatest rewards.
So, if you’re in the market for a bargain after Tuesday’s turbulence, the following growth play seems worth considering right here. Given its long-term track record of gaining for investors, I’d argue that the name may be deserving of a spot in every young investor’s long-term-focused portfolio.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is a convenience store firm that hit a road bump earlier this year after briefly going parabolic in the back half of last year. Indeed, parabolic moves tend to be followed by some pretty painful corrections. And though Couche-Tard really didn’t do much to deserve such a heavy hit to the chin, the valuation did get a tad on the frothy side for a while. The good news is that most of the froth seemed to have been eliminated when shares were corrected by around 15% this spring.
Though it’s been a rather turbulent rebound, I continue to view the convenience retail firm as one of the best growth stocks in the country. Indeed, it’s a low-tech growth firm that’s relied on mergers and acquisitions (M&A) to jolt earnings growth. But unlike many other firms (like those in the tech sector) that make deals because there’s excess cash to put to work, Couche-Tard is fine with sitting on its dry powder until there’s a deal out there that holds a high chance of unlocking significant value for shareholders. Indeed, it takes a true owner’s mindset to only make the deals that entail value creation.
The king of convenience
Oftentimes, firms get a tad ahead of themselves when it comes to M&A, running the risk of overpaying for a business that may be less than a fraction of the price paid. Further, news of deals can also get a stock moving and make management seem busy. Neither of these are guarantees of value creation, however.
In any case, Couche-Tard is a growth-by-acquisition superstar and one that’s not about to slow down anytime soon. With shares recently dipping over 5% from their monthly high, I’d argue that now’s a great time to consider nibbling at shares while they’re going for just 20.75 times trailing price-to-earnings (P/E) ratio.
Bottom line
Couche-Tard isn’t just a steady appreciator; it has virtually unbounded growth opportunities in the global convenience retail market. Further, the company is bound to make a pivot into the grocery business (either in Europe or North America) at some point over the next decade, at least in my humble opinion.
Such a deal just makes sense as the firm looks to beckon in shoppers for fresh food and grocery items rather than gas at the pump.
