What is the perfect “starter stock” for a new Canadian investor who’s looking to kick things off on the right foot? Undoubtedly, when it comes to your TFSA (Tax-Free Savings Account), you should be willing to hang onto a stock for at least the next 10 years.
Preferably, it’d be best if you invested with the next 20 or even 30 years in mind, given the profound power to be had from tax-free compounding.
The longer you hang onto a wealth compounder, the greater the effect will be, and though there may be several hefty expenses (think a mortgage, marriage, tuition, childcare expenditures, caregiving costs, or something else entirely) that might pop up and cause you to withdrawal a bit from your TFSA, I do think that, if you can help it, this basket of investments should be one of the last accounts you look to draw down from.
In essence, it’s a last resort, but, of course, it’s there if you need it, and you can always build that TFSA back up again once you’re in better financial standing. Either way, for a new and young investor who has looming expenses (living expenses, school, emergency fund, and all sorts) covered by sources of income or savings elsewhere, it’s worth playing not only the long game with one’s TFSA, but the extreme long game.
This piece will look at a starter stock candidate that I think might be worth buying and hanging onto for the long run.
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Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is a perfect starter stock for TFSA investors for a wide range of reasons.
First, it’s a pretty easy-to-understand business with a legendary management team that has unlocked value via acquisitions as well as organic growth efforts. The convenience store operator behind Circle K and Couche-Tard (as it’s referred to in Quebec) has a predictable business model that has paved the way for impressive low-tech cash flows. And while the pace of M&A has slowed, it’s worth noting that the balance sheet is still in excellent shape, with enough room to allow optionality should a bargain come by Couche-Tard’s way in 2026. Given the hints we’ve heard from management about a deal, I think the new year could be a big comeback year for the name.
Second, shares are relatively cheap, especially for a defensive retailer, going for just 19.6 times trailing price-to-earnings (P/E). While there hasn’t been a lot of eventful news, I do find the consumer staple to be in a choppy consolidation mode between $68 and $77 per share. If you can buy at the mid or low end of the range, I think there’s a good risk/reward to be had.
Finally, Couche-Tard’s food pivot may still be underestimated by the market. It’s a magnificent growth driver that, if management gets it right, could power Couche-Tard stock right back to all-time highs.
Indeed, with Guy Fieri meals serving as a catalyst and the option to acquire a restaurant chain or a convenience retailer with a wide moat in fresh, ready-to-order food (think pizza, subs, or something else), I wouldn’t discount Couche-Tard after a lagging year.
Bottom line
In numerous prior pieces, I highlighted the food opportunity as a big one for the convenience store chain. Though it has made strides in ready-made food, I do think ready-to-order could be an even bigger deal that propels Couche-Tard’s growth to higher highs.
