Don't Miss AI's Third Wave
After the failure of Silicon Valley Bank and Signature Bank, the problems at Credit Suisse have led to volatility in the equity market. Meanwhile, the Canadian benchmark index, the S&P/TSX Composite Index, has fallen by 6.3% from this year’s highs. The growing volatility can make you nervous if you are new to investing.
However, if you have a longer investment horizon, you should not get boughed down by short-term volatility and go long on quality stocks. Here are my three top picks.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) operates around 14,300 convenience stores across 24 countries, offering food products, non-food items, and transportation fuels. Given the essential nature of its business, the company’s financials are less susceptible to economic cycles. The company has grown its EBITDA (earnings before interest, taxes, depreciation, and amortization) at an annualized rate of around 20% since 2012. Supported by its solid financials and strategic acquisitions, the company has delivered an average annualized return of 22.7% over the last 10 years.
Despite its expansion, ATD has acquired around 5% of the market in the United States. With the highly fragmented market, the company is well equipped to consolidate its market share. It recently closed the acquisition of True Blue Car Wash, which operates 65 express tunnel car wash sites in the United States. ATD is working on acquiring 45 fuel and convenience stores of Big Red Stores in Arkansas and a few European assets from Total Energies. Along with these growth initiatives, its cost-optimization initiatives could boost its financials in the coming years.
Further, ATD pays a quarterly dividend of $0.14/share, with its yield for the next 12 months at 0.9%. Although its yield is lower, the company has been raising its dividend at a healthy CAGR (compound annual growth rate) of 25% since 2012. Its valuation also looks reasonable, with its NTM (next 12-month) price-to-sales multiple standing at 0.6. So, considering its solid track record, stable cash flows, and healthy growth prospects, I believe ATD to be an excellent buy for beginners in this volatile environment.
Fortis
Second on my list is Fortis (TSX:FTS), which operates 10 regulated utility businesses meeting the electric and natural gas needs of around 3.4 million. With approximately 93% of its assets involved in the transmission and distribution of electricity and natural gas, economic volatilities will have less impact on its financials. Over the last 20 years, the company has delivered average annual total shareholder returns of 11.3%, outperforming the broader equity markets.
Meanwhile, Fortis has committed a capital investment of $22.3 billion for the next five years, with $5.9 billion on clean energy. Meanwhile, these investments could grow their rate base at a CAGR of 6.2% through 2027. So, the company’s management hopes to maintain its dividend growth through 2027. Meanwhile, it has a solid track record of raising its dividend for the past 49 consecutive years. So, I believe its solid business model and healthy growth prospects would make Fortis an ideal buy for beginners.
Waste Connections
Waste Connections (TSX:WCN) is North America’s third-largest solid waste company, primarily operating in exclusive or secondary markets. Over the last 10 years, it has delivered impressive total shareholder returns of 523% amid solid financials and continued acquisitions. Despite a challenging 2022, the company maintained its financial growth, with its revenue and adjusted EBITDA growing by 17.2% and 15.7%, respectively.
Meanwhile, given its investments in renewable natural gas and resource recovery facilities and strategic acquisitions, I expect the growth to continue. It is constructing two recycling facilities, which could become operational next year. Waste Connections has been raising its dividend at a CAGR of 15% since 2010. Despite its expensive NTM price-to-earnings multiple of 31.7, I believe Waste Connections is an ideal buy for conservative investors.
