Despite stretched valuations (at least in the U.S. stock market) and the potential threat of 25% Trump tariffs, I’d still argue it’s better to be a net buyer of value stocks than to sit on the sidelines, waiting for the list of worries to fall. Indeed, if you’ve been invested in markets before, you’ll know that if it’s not tariffs to be worried about, it’ll be something else.
Undoubtedly, stock investing is a game where it pays not to show any emotion, whether it be excessive fear when stocks are tanking or greed when stocks only seem to go higher by the week. And while we may be overdue for a 10% correction, I’d argue that it could be very difficult to tell whether the rally that ensues from current levels will exceed any ground that would have been lost in a correction. Being overweight cash is never a good idea, especially since you may not be able to deploy all the cash you would have liked once the correction finally does come. And if you’re waiting for a 10% drawdown and stocks only decline by 5-9%, such a dip may not allow you to put all that excess cash to work.
What sits in your savings could be left at risk of purchasing power erosion as inflation continues to weigh. Of course, inflation has come down from where it was around two years ago. Still, inflation can bounce back on a wide range of variables (think tariffs), and, with that, the opportunity costs of holding cash should be carefully considered by Canadian investors who are a bit nervous about putting new money to work while we’re close to new all-time highs.
Finding value in a pricey market? You don’t have to look too far
In this piece, we’ll look at an underrated and undervalued Canadian stock that seems like a great bet, regardless of market-wide concerns or fears of a tariff-induced correction. Sure, widespread tariffs could take a bite out of the TSX Index. But, at the same time, a lack of tariffs could also jolt a wave of enthusiasm across markets.
Either way, it’s time to look at some value plays that stand to be great bets over the next five years and beyond. Over such a timespan, there will be many things to consider and worry about at the macro level. Such worries, though, mean less in the grander scheme of things, provided you pick up shares of solid firms at modest or discounted multiples.
Couche-Tard: A bargain stock to consider in 2025
At these levels, I see Alimentation Couche-Tard (TSX:ATD), a Quebec-based convenience retailer whose name roughly translates to “Night Owl,” as a market bargain, with shares shedding another 2% on Monday’s session on seemingly no news. Indeed, the convenience retailer has been stuck in a rut ever since news broke that it was going after 7-Eleven. A Couche-7-Eleven merger has the potential to be historic, but it entails risk. But if you’ve been in Couche-Tard long enough, you’ll know that management only makes deals that entail significant medium-term and long-term value extraction. Indeed, I think the managers deserve investor’s trust, regardless of what ends up panning out with 7-Eleven.
With the stock closing in on 52-week lows in the low-$70s, I think it’s time to pick up a few shares. The $69.2 billion convenience store icon is a textbook growth-by-acquisition synergy-extractor. And while it could be a while before the next big deal (7-Eleven or something else) will happen, I believe investor patience will be rewarded, especially now that the stock has corrected and underperformed the TSX Index over the past two years.
I’m inclined to bet that Couche-Tard will return to its market-beating ways. We just have to give the name some time.
