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Step aside, FAANG and Magnificent Seven; there’s a new acronym that I’ve come up with to describe some of the top growth stocks that Canadian investors should pursue for the long haul. Undoubtedly, given the weak state of the loonie, which is sitting just shy of US$0.70, I do think it makes sense to pick up a top-tier Canadian growth stock this February, if not to avoid the pain of exchanging loonies for greenbacks, for the relative undervaluation on Canada’s proven growers.
The ABCs of Canadian growth investing
Undoubtedly, it’s always tricky to find an acronym that really sticks. But I think I may have one with the “ABC,” which, I believe, describes four of Canada’s most robust growth plays. So, whether you’re a young, aggressive growth investor who’s looking to outpace the TSX Index or even the S&P 500 over the span of decades or an older investor who seeks more of a growth edge in equities, the following three names, I believe, are worth additions to any Tax-Free Savings Account or Registered Retirement Savings Plan, assuming prices are modest.
Today, valuations on the three names vary, with some being a bargain while others are running a tad hot. Either way, all three are musts for any watchlist. Without further ado, let’s take a closer look at Canadian “ABC” stocks.
Alimentation Couche-Tard
First, we have Alimentation Couche-Tard (TSX:ATD), the simplest to understand of the three stocks. The convenience retailer is best known for its Circle K brand or Couche-Tard if you’re from Quebec. Of late, the stock has been under pressure as investors seem to be in the dark over what’s to happen with the proposed 7-Eleven deal. With more suitors potentially jumping in, questions linger as to whether Couche-Tard will be able to get the deal done.
Either way, I like Couche-Tard for the long haul, as the firm continues to drive synergies via mergers and acquisitions (M&A). As one of the best growth-by-acquisition firms in retail, I’d not sleep on the stock after its latest correction. At $72 and change and 15.9 times forward price to earnings (P/E), you’re getting a steady grower at a severely depressed multiple. I’d take advantage of any negative 7-Eleven headlines and pick up shares of any further dips toward $70 because, like it or not, Couche-Tard is more than capable of finding value elsewhere.
Brookfield Corp.
Brookfield Corp. (TSX:BN) stock has been blistering lately, surging more than 60% in the past year. Indeed, the Canadian alternative asset management play has been picked up by a number of big-name hedge fund managers in recent years, Bill Ackman being the most notable among them.
Though you’ll be paying a higher price (shares go for $85 and change today) for entry, I still think there’s value in the name, especially given the robust demand for alternative assets and the value of having real, predictable, cash cow-like assets that can fare well in good times and bad. As one of the gold standards in alternative assets, don’t sleep on the name, especially if shares are dragged down by a broad market sell-off. At 15.9 times forward P/E (the same as ATD, coincidentally), shares still look rich with value.
Constellation Software
Constellation Software (TSX:CSU) is a hidden gem of a tech firm that many Canadians should now be well familiar with. The stock seems out of reach and overdue for a split at just shy of $5,000 for a single share. Still, the firm has an M&A plan that works, and with 110% gains in the last two years, I think Canadian investors should put the name at the very top of their radars.
Indeed, CSU stock may be a tad pricey here, but a pullback, I believe, would be a gift, given its proven formula for driving growth within Canada’s highly underrated and overlooked software industry. If you want a proven performer in tech, look no further than the name.
