2025 has been an exciting year for Canadian capital markets. The TSX composite outperformed its U.S. counterparts for the year, while many individual Canadian stocks delivered genuinely exceptional performances.
Heading into next year, the picture is less clear than it was at the beginning of this one. With the TSX Index up 25.8% for the year, things are looking potentially overheated. However, the TSX’s current P/E ratio (22) is not nearly as high as that of the U.S. markets, and the estimated forward P/E ratio (14.6) is maybe even a little on the cheap side. While I wouldn’t expect the TSX to soar another 25% next year, the foundation is in place for it to perform reasonably well. Accordingly, I’ll spend the remainder of this article exploring two TSX stocks positioned to beat the global markets next year.
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Brookfield
Brookfield Corp (TSX: BN) is Canada’s largest non-bank financial corporation. It is the fourth-largest company in the country; the entire “Brookfield ecosystem” (including the assets it owns and partner assets it controls) would likely be the biggest company in Canada if counted as one.
Why do I think Brookfield has a shot at beating the markets next year?
First, Brookfield’s asset management business has over $100 billion in committed but uninvested capital to play with. As it finds deals to invest that money in, it will gradually increase its fee-related income. Brookfield’s asset management business is a publicly traded company in its own right; Brookfield Corp is the best vehicle through which to get exposure to it, as it trades at a discount to net asset value (NAV). Owning Brookfield Asset Management directly, on the other hand, is a rather pricey proposition, as that stock trades at about 33 times earnings.
Secondly, Brookfield has many activities in other parts of its business. Its infrastructure business is buying up AI data centres; its renewables business is supplying power to Alphabet and Microsoft; its insurance business is growing rapidly. There are many interesting things happening with Brookfield Corporation today, yet the stock still trades below its NAV. Eventually, I’d expect Brookfield’s stock price to reflect all the value it has under the hood.
Alimentation Couche-Tard
Alimentation Couche-Tard Inc (TSX: ATD) stock is another TSX staple that has a shot at beating the market next year. ATD is a very successful business that has expanded at a rapid pace over the years through successful mergers and acquisitions (M&A). It bought up the U.S. Circle K gas station chain and successfully expanded it all over Canada. The convenience store and gas station operator concluded successful M&A in Europe as well.
Alimentation Couche-Tard has been beaten down in the markets over the last few years, thanks largely to a failed attempt to take over 7/11, as well as a decline in road fuel prices that hit the company’s earnings hard. I think both of these issues are behind us. OPEC is holding oil output steady, and ATD’s questionable 7/11 deal was shot down by the Japanese. So, what we’re left with is a long-term, profitable business that should mean-revert sooner or later.
The bottom line
The Canadian markets have done exceptionally well this year, and look poised to repeat the feat next year. With plenty of value under the hood, the TSX could surprise to the upside yet again.
