Diversification is the way to go with your Tax-Free Savings Account (TFSA), but if I had to choose just one Canadian stock to stash away for the long haul, I’d probably go the route of an S&P 500 or TSX Index exchange-traded fund (ETF). If ETFs are off the table and I had to pick a stock, it’d be a tough choice.
Though it’s never a good idea to run the risk of under-diversification, especially with an account so valuable as a TFSA, I think that it ultimately comes down to the names that you’d be comfortable hanging onto, even when the times get tougher. Of course, putting all of your eggs in one basket is a terrible idea if you’re a new investor.
For those such investors, perhaps there is no shame in sticking with the S&P 500 or TSX Index ETFs. Of course, for more experienced long-term investors, the saying (I think it was Andrew Carnegie who said it) that you should put all your good eggs in one basket and watch the basket might be the move that’s right for you.
In any case, I guess it all comes down to whether you want to do well and avoid the big risks, or if you want to crank up the rewards potential for a name you really do believe in. Even the great Warren Buffett thinks it’s best to prioritize your best ideas rather than to spread capital across your second-best, third-best, and so on. As far as Canadian stocks, I’d be more than happy with hanging onto them for the long haul (perhaps alongside some index ETFs).
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Alimentation Couche-Tard: One stock I’m happy to hold for decades
I think Alimentation Couche-Tard (TSX:ATD) is such a name for me. While I’d never make it the only egg in the TFSA basket, I think that the convenience retailer is a fantastic candidate to form the core of a long-term growth fund, especially as most other investors become a bit impatient with the name.
The merger and acquisition (M&A) engine has slowed down a bit, at least relative to the past. But given today’s valuation landscape (especially in retail), I’d argue the slower approach does no harm.
Of course, tuck-in deals (mini-M&A) across the convenience store scene still make sense, but, at the end of the day, Couche-Tard is now a more than $71 billion company. Bigger deals and organic growth are becoming more important, especially as the landscape changes.
While it’s been quite uneventful since the 7-Eleven deal was shot down last year, I think that Couche-Tard has optionality to make other smaller-scale, lower-risk deals, perhaps one that could change the convenience retailer more fundamentally. Even without deals, the Miller era could see great efficiency gains as retail tech rolls out and the firm finds new ways to resonate with consumers.
The fit-to-serve program is expected to save big money in the coming years. That’s more dry powder to buy back stock and ready for the next big acquisition wave.
These days, customers want value, options, and a focus on hot and fresh food. And there are more ways to deliver on each front without having to go on a deal spree.
The relatively new CEO, Alex Miller, expressed his firm’s intent to have a tighter grip on the supply chain. In my view, restaurant-quality food and grocery supply chains could be the golden ticket to next-level growth, even as the firm climbs the market cap standings.
If the market takes a dive, I think Miller and company will be ready to move, and that makes ATD a consumer staple stock that might not walk away empty once the economy finally does fall into a recession. The company’s balance sheet is solid, and there’s more than enough dry powder to go on a bargain spree if a downturn were to hit at some point.
