With the TSX Index surging another 0.8% on Thursday’s upbeat session, the Canadian market suddenly finds itself at fresh, new all-time highs. Suddenly, the recession fears, stagflation jitters, and worries of back-and-forth tariffs seem less troubling to investors who seem ready to move on. Of course, there’s still plenty of risk out there, but with a market that’s full of value, I’d argue that the TSX Index is better equipped to ride out another year of macro headwinds, perhaps en route to a market environment that would allow artificial intelligence (AI) tailwinds to lift up most boats.
So, while the same risks that existed a month ago are still very much on the table, they do seem more manageable now that we’ve all had a chance to digest the impact of tariffs and the likelihood that President Trump will want to get a deal done sooner rather than later. In any case, the U.S.-China trade pause and progress on talks, I think, is a good sign that we can expect a lowering of the bar on tariffs.
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The TSX is breaking out. But not every stock is off the canvas!
While Canadian investors can’t turn back time and buy the post-Liberation Day (the day Trump shocked the world with a large card that showed tariffs on just about every country) dip, I think that it makes sense to focus on the path ahead and the undervalued names that may not have participated in the past few weeks of robust relief gains.
Indeed, the TSX Index’s breakout moment may have room to run as we head into the summer months. And while a U.S.-Canada trade deal isn’t guaranteed, I’d argue that the odds are higher, at least in my opinion, that things can only get better from here. In any case, if a deal is suddenly struck, perhaps the TSX Index will have enough strength to leave even the S&P 500 behind. For investors with a considerable sum (let’s say $16,000 or so), here is a name that’s still down and out despite the market’s latest red-hot surge.
Alimentation Couche-Tard
Shares of Alimentation Couche-Tard (TSX:ATD) are struggling to stage a comeback after briefly entering bear market territory (that’s defined as a drop of at least 20% from highs). Now under $70 per share, ATD stock goes for an absurd 16.2 times forward price to earnings (P/E). With a nearly 1.2% dividend yield and a time-tested growth-by-acquisition strategy that can still pave the way for respectable growth over the next decade, the convenience retail juggernaut looks like a deep-value and growth play.
Indeed, the 7-Eleven deal may very well be entering its latter innings, as I noted in a prior piece. Such news may be near-term headwinds for the stock, given how pricey it’ll appear on the surface. That said, I think 7-Eleven in the hands of Couche-Tard could be a real force to be reckoned with.
Undoubtedly, 7-Eleven chains in North America could certainly use an upgrade as the industry shifts away from fuel and tobacco sales and towards fresh food. If a deal is ultimately given the green light, perhaps Couche-Tard will not only stand to win 7-Eleven’s prized assets but also its talent.
Indeed, the convenience store business is transforming as electric vehicles, AI, food delivery, digital apps, and other disruptive innovations shift the sales mix towards fresh and packaged foods. Perhaps there’s no better way to brace for the huge wave of change than to have the convenience retail industry’s two superpowers join forces. Either way, I couldn’t be more bullish on ATD stock as it approaches the final stretch in its bid to buy 7-Eleven’s parent.
