A market correction might just hit in the new year, but that’s not only to be expected in any given year; it’s a normal, healthy thing that I think new investors should treat as more of an annual sale (like a Black Friday on the stock market) than something to be avoided. While the corrections are worth buying into weakness, I don’t think that long-term thinkers should wait for them if they’ve got too much cash to put to work.
Undoubtedly, there are opportunity costs that come with having too much cash sitting around in a savings account earning next to nothing, as there are with putting money into markets after missing out on a more than 20% upward move in the TSX index in just over 10 months.
Either way, a nice middle ground that sees investors put some money into stocks today while leaving some to buy in rainier days could prove wise. The key is understanding the opportunity costs (inflation’s toll on cash hoards while markets continue gravitating higher) and making an informed decision given the slate of risks to be taken on and the rewards to be had. In this piece, we’ll look at two proven growers I’d be happy to buy and hold for the next three years or more.
Of course, the longer you hold, the better, at least when it comes to growth stocks with solid longer-term narratives.
Dollarama
You don’t need to be in high-tech AI or agents to do extraordinarily well. Just check out shares of discount retailer Dollarama (TSX:DOL), which have outperformed once again this year, surging over 36% year to date on the back of some impressive quarters. Indeed, Dollarama isn’t just another dollar-store chain; it’s so much more. Its goods are priced to get the best bang for your buck amid inflation and economic worries.
And with Bernstein recently praising Dollarama as Canada’s version of Costco, only with a cheaper price of admission on the stock and no membership fees, I’m inclined to view shares of DOL as still a great value and momentum pick-up going into year’s end. I think Bernstein is right on the money to draw comparisons to Costco and think that, like Costco, there aren’t enough Dollarama stores out there to keep up with the seemingly insatiable appetite for a good deal.
Regardless of income, everybody could use a good deal, and I think Dollarama’s ability to provide such a deal, the likes of which may be comparable to the likes of a Costco, is a source of its greatest strength. At just north of 32 times forward price-to-earnings (P/E), I see DOL shares as a fair price to pay for a premium defensive growth icon.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is another Canadian retailer that has a solid growth profile. Sure, after a lacklustre few years, I’m sure many may ponder whether the convenience retailer behind Circle K can still be classified as a growth stock. Undoubtedly, sales growth has ground to a slowdown, but once the firm gets more active on the M&A front again, the growth will follow. It’s just a matter of when Couche-Tard will get its promising growth-by-acquisition jolt back.
If you’re willing to hold for at least three years, I think the timing of the next big deal matters less. Arguably, a lack of catalysts or dealmaking has made for a tremendous buying opportunity to get a better price for those with patience than those without.
When it comes to convenience retail, I sense a big food-driven pivot coming. And the partnership with Guy Fieri for intriguing ready-made meals is just the start. In short, Couche-Tard is misunderstood as it reaches a fork in the road. Sales have been in a tough spot, but there are so many levers to pull to reignite growth (and the share price). As such, staying invested seems wise.