With broad markets starting to get that much choppier going into the peak of big tech earnings season (who can blame investors for getting a bit more nervous given how hot stocks have been for yet another year?), investors might be more inclined to wait and see how things play out. After all, it’s tougher to be a buyer amid the rougher patch in the road. And while stocks, on average, still seem a tad more expensive than historical averages, I still think that stock pickers can “pick and choose” their way to better value than the broad markets can currently provide.
Undoubtedly, index investing has been booming in recent years and for good reason. It’s a cost-effective way to score a pretty good return. While you won’t beat the markets, you also won’t underperform, and, at the end of the day, settling on a market return can be a pretty good thing, especially for a new investor who’s just getting started, with their first $3,000 or so to be put on the equity markets.
Of course, there’s little issue with buying the S&P 500 (or even putting a bit on the TSX Index) after every month or quarter, and perhaps putting a bit more on those big corrections.
Still, for those who do have a sound knowledge of markets and a Warren Buffett-esque value approach, I think that one can do better in markets by positioning soundly and insisting on discounted stocks, rather than buying what’s hot or buying just about everything. Either way, I think new investors shouldn’t turn away from index funds, at least to start. If you’re looking to pick your own stocks, though, I think today’s market is great.
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Alimentation Couche-Tard
Shares of convenience store icon Alimentation Couche-Tard (TSX:ATD) sank another 5% on Wednesday’s session, nudging it down 19% from all-time highs. Amid such a bearish environment, questions linger about the firm’s next step, as it remains relatively silent on the acquisition. Though the lack of a 7-Eleven deal has been perceived as a negative, I think it could be a good thing, especially since, in my opinion, there’s much better value elsewhere.
Also, 7-Eleven isn’t exactly thriving right now, especially outside of Japan. I’d argue that Couche-Tard should boost same-store sales through modernization and innovation before making its next big deal. I think there’s much more synergy to be had if Couche-Tard can scale up after it finds a new formula to really take same-store sales (which have been decent despite headwinds) to the next level.
With valuations on the higher end and interest rates on the descent, Couche-Tard is in a rather difficult spot when it comes to its growth-by-acquisition engine.
Does Couche-Tard sit on its sound balance sheet and wait for a synergy-rich opportunity to strike? Or does it make a deal for the sake of making a deal?
While I wish Couche-Tard would make a major acquisition soon, I’m completely fine with whatever management decides to do next. They have a value mindset, which makes Couche-Tard stock a buy while it’s down close to 5% on seemingly no real bad news. I didn’t think the move made a whole lot of sense!
Given the performance of some of Couche-Tard’s rivals, I’d say it’s just a matter of time before the Canadian gem gets going again as it starts really innovating in stores to drive same-store sales growth. At 18.5 times trailing price to earnings, ATD stock is underrated and overdue for a bounce once its next deal-making spree kicks off (probably in 2026).
