Investing can take many forms. Whether investors focus solely on growth stocks or value companies, or are focused in one particular sector or geography (the U.S. continues to lead the way in this regard), they can choose from a number of places to put their capital to work. For investors looking at the Canadian market, the good news is that there are plenty of top TSX stocks worth putting capital into right now.
In my view, the Canadian market is relatively overlooked, making these opportunities even more attractive on a relative basis. For those seeking meaningful value and the potential for long-term outperformance, here are two stocks I think are worth investing in right now.
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Alimentation Couche-Tard
Alimentation Couche-Tard (TSX: ATD) is one of the largest convenience store operators in the world, and it’s based in Canada. The company’s portfolio of gas stations and convenience store chains spans the world, with global ambitions on becoming a true powerhouse while continuing to propel bids for some of the most notable brands in this space (unfortunately, the company’s deal to acquire 7/11 doesn’t appear to be going through, but such a deal is indicative of how this company has grown over time).
Using a growth-by-acquisition model, Couche-Tard has become a stellar growth stock, roughly doubling over the past five years (with similar performance seen over the very long term). Since this stock went public in 2001, Couche-Tard’s stock has gone from around $0.50 per share to nearly $75 per share – that’s the kind of growth long-term investors want to see.
Of course, as Couche-Tard has grown, its opportunities to make acquisitions that move the needle have dwindled. This could lead to slower growth over the longer-term and is one of the reasons why this stock trades at a reasonable multiple of just 19 times earnings. Indeed, for a company that can continue to grow both organically and via acquisitions, I think this multiple is too low. But that’s just me – the market is the market.
Couche-Tard’s recent results, which showed 5.5% GMV growth over the past year, is indicative of the kind of organic growth I think investors can expect moving forward. Adding in some major acquisitions in the coming quarters could juice these numbers further, and lower interest rates could help the company’s borrowing costs if this is the case. We’ll have to see how things shape up, but this is a top growth stock I think is worth considering right now for these reasons.
Bank of Montreal
Bank of Montreal (TSX: BMO) is among the top stocks I’d put in the long-term buy-and-hold bucket, for a number of reasons. For one, this is among Canada’s five largest banks, with an incredible footprint of retail banking complemented nicely by a strong wealth management, personal and commercial banking, and capital market business. Over the past five years, BMO stock has performed well, though it has certainly underperformed many other higher-growth stocks over this period. That’s generally okay, for the investor profile that’s likely interested in such a stock.
Bank of Montreal is another dividend-heavy offering on the TSX, providing investors with a yield of 4.9% in addition to its capital appreciation upside potential. Accordingly, the stock’s total returns over the past five years are certainly better than the chart above would indicate. I’d expect the company’s dividend yield to continue to remain around these levels, as the company focuses on returning value to shareholders over time.
Aside from the company’s dividend (which has been paid out quarterly to shareholders for more than a century), there’s a lot to like about the bank’s growth profile, particularly in the U.S. market and in higher-growth Latin American markets. For investors seeking a stable Canadian company with strong long-term growth upside and a very meaningful dividend yield (which looks much more attractive now that rates are coming down), this is a stock to consider at current levels. If BMO pulls back from here, I’d double down on that recommendation.
