Tax-Free Savings Account (TFSA) investors who put money to work at the start of this year are probably pretty happy with the results thus far, with the S&P 500 and Nasdaq 100 absolutely surging out of the gate. Undoubtedly, tech and growth have been in full-on rally mode for many quarters now. Still, that does not mean there aren’t bargains that exist in today’s market. Some may ring the alarm bell over a handful of overvalued names in the artificial intelligence scene. But there are a lot of neglected names that I believe still over a good bang for your TFSA buck!
In this piece, we’ll have a closer look at two growth stocks that still have a reasonable multiple attached to them. Understandably, the tech sector’s leadership will not go on forever. And if it overextends itself, the stage could be set for a rough patch. As for the broader market, I don’t think things are necessarily overvalued. If you’re a selective investor, I think there are ways of setting yourself up for solid results from here, even as a recession hits corporations right in the earnings.
What has been working these days? Proven, resilient earnings growth companies like Alimentation Couche-Tard (TSX:ATD) and Constellation Software (TSX:CSU).
Alimentation Couche-Tard
Couche-Tard’s a wonderful company for so many reasons. It’s a global convenience store giant that’s best known for growing its bottom line via smart mergers and acquisitions (M&A). What many may discount, however, is that management is also very good at driving efficiencies and growth at the organic level. Undoubtedly, the convenience retail industry is changing, with gas stations likely to be gradually swapped out with charging stations over the next 10-15 years.
With all the hype over charging stations and the future of electric vehicles (EVs), I think investors should start viewing Couche as a company that can adapt rather than simply missing out on fuel sales as more EV cars replace gas-powered ones on roads. In the meantime, Couche-Tard is flush with cash. As a Canadian recession happens, look for the company to continue to keep a look out for potential deals in its industry, both at home and abroad.
Finally, Couche-Tard has a wild card up its sleeves in that it may choose to go down the route of grocery when it comes to a future deal. Though it has not had luck breaking into the big-grocery scene in Europe, I think that such a lateral move makes sense and may happen once valuations come back down to Earth.
Down 4% from its high, Couche is within striking distance of never heights at around $68 per share. I think it’s just a matter of time before that next leg higher.
Constellation Software
Constellation Software deserves more respect from North American investors. Just look at the past performance. In five years, shares have surged 156%. That’s impressive, especially considering CSU stock wasn’t as badly hurt as some of its software peers during the 2022 tech plunge.
An argument could be made that Constellation’s an expensive company. At around 85 times trailing price to earnings (around 33 times forward price to earnings), a case could be made that the $2,695 per share firm is too hot to handle. However, I think Constellation is a high-multiple stock that can grow into its multiple. It’s done it before and it can again, as it unlocks value from every M&A deal it makes.
I like to view the firm as the Couche-Tard of Canadian software. In that regard, I believe CSU stock is a buy, even around a new high!
