As investors wait for the coast to clear on tariffs, they may be missing out on some fairly resilient (and cheap) stocks that may be able to hold up come the next big market drop. Undoubtedly, the longer tariffs stick around, the more future earnings stand to take a hit. Either way, investors should ready their TFSAs (Tax-Free Savings Accounts) to invest through the good times and bad because, at the end of the day, a man-made recovery may not be all too far off from a man-made downturn.
Without further ado, let’s check out two intriguing consumer staple stocks that can help more defensive TFSA portfolios deal with what could be a rocky couple of months, as Trump and leaders from other nations aim to have “productive” conversations.
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Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is arguably one of the growthiest consumer staple stocks around. Over the decades, the convenience store firm behind Couche-Tard in Quebec and Circle K almost everywhere else has grown its top and bottom lines through some very smart and well-timed acquisitions. Indeed, the global convenience store remains fragmented, and Couche-Tard is one of the most notable consolidators that seems to know how to bring out the best in stores it brings aboard.
Though there’s a haze of uncertainty surrounding the name as it hopes to close what could be its biggest deal to date (Japan’s 7 & i Holdings), I’d continue to stick with the name as its long-term M&A (merger and acquisition) growth engine will keep humming along either way. Arguably, shares of ATD could be in for a relief pop if regulatory hurdles prove too challenging to overcome. Either way, at 19.34 times its trailing price-to-earnings (P/E) ratio, the Canadian consumer staple looks like a bargain that could fare relatively well if the North American economy encounters a bit of a tariff road bump this summer.
Dollarama
Dollarama (TSX:DOL) stock is close to fresh all-time highs of just over $170 per share. Undoubtedly, shares are getting on the expensive side after the latest 22% year-to-date pop. At the time of this writing, DOL stock trades at 41.1 times trailing P/E to go with a mere 0.25% dividend yield.
Given that Dollarama stood tall during COVID era disruptions and the inflation that followed, I’d argue that the firm is no stranger to navigating crises. Even in the face of supply chain hiccups and rising prices, Dollarama was able to maintain its value proposition with Canadian consumers. With the potential for tariffs to spark even worse inflation, Dollarama may very well be the place to hide as the firm looks to keep swimming forward (its expansion plan is still a go), even as the tides work against it.
The only major concern I have about shares of the discount retailer lies in the valuation. I’m no fan of loading up on a stock after a sudden melt-up. While a pullback may or may not occur as investors seek shelter in defensive consumer staples, I think that averaging into a position throughout the year seems to be the best course of action for those wary of chasing overheated stocks.
