Valuations for specific stocks and specific sectors can depend greatly on how many investors are following these names. The relative lack of analyst and investor attention to some Canadian stocks has resulted in what I’ve argued for a long time is a massive opportunity. Many such companies are overlooked and undervalued, at least relative to their long-term growth potential.
In this article, I’m going to cover two such Canadian stocks I think fit this profile. Let’s dive in!
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Alimentation Couche-Tard
Despite trading at a market capitalization of nearly $65 billion, Alimentation Couche-Tard (TSX:ATD) is a company I’d argue many investors outside of Canada may have never heard of.
That’s a crying shame, in my view.
Some investors may have heard of this company as one of the few able to make a bid for Japanese convenience store chain 7-Eleven, as well as a number of other high-profile potential deals that fell through (including a multi-billion-dollar bid for a French grocery chain).
The gas station and convenience store giant has been looking for even greater scale and diversification, as same-store sales gains slow. A company that’s grown for decades via consolidating a very fragmented industry (the majority of gas stations and convenience stores around the world are still mom-and-pop operations), growth has slowed on this front. That’s led to a slowing of share price gains, as investors looking for growth move elsewhere.
That said, I think the company possesses the balance sheet and willingness to pursue more deals as they arise. And with a still very fragmented industry to consolidate, a solid balance sheet, and a reasonable valuation and dividend yield, this is a stock that still has it all.
Manulife Financial
In the world of Canadian mega-cap insurance companies, Manulife (TSX:MFC) is the giant. However, in the world of global insurance companies, Manulife still definitely flies under the radar as a relatively smaller player.
This size discrepancy has led to relative underperformance for this Canadian insurance giant during previous down cycles, such as what we saw play out in 2021 and 2022.
Since then, MFC stock has been on a tear, due in part to rising interest in insurance companies as a whole. Following its previous declines, Manulife stock was cartoonishly cheap and has since recovered to near historical multiple levels.
That said, as the company continues to grow its wealth management business and expand rapidly in China, I can see a scenario in which growth outpaces even the most bullish Canadian analysts on the company. At current levels, I still think Manulife is undervalued and overlooked, and this remains a top idea on my buy list right now.
