Canadian stocks had quite a rocky ride in 2022. The first month of 2023 is very hopeful, even with a recession on the horizon and a closer glimpse of how last year’s rate hikes will impact the bottom lines of firms.
History suggests stock markets will struggle to bottom out before the recession arrives. In any case, a recession may still be avoided. Further, if we’re in for a mild and short-lived recession, markets may be able to finish 2023 higher, given how much recession fear was factored in last year.
Indeed, markets are a forward-looking indicator for recessions. Not the other way around. That’s why investors shouldn’t try to time markets over economic data that’s flowing out. Not only is such data already mostly factored in, but it’s not actionable for everyday retail investors. Instead, investors should set their sights ahead of where Mr. Market is looking. Looking to 2025, 2026, and even 2028 makes a lot of sense for today’s young investors looking to build wealth. The longer out you look, the less bumpy today’s road will be!
In this piece, we’ll consider two Canadian stocks that I think will be in for a pretty big year. Shares are beaten down, and valuations are a tad on the low end. Even with a recession considered, I think the following names are intriguing pick-ups for those who don’t know what to do with their latest $6,500 TFSA contribution.
Restaurant Brands International
Restaurant Brands International (TSX:QSR) has been an uneventful fast-food stock for many years. 2023 could be the year it finally eclipses multi-year highs en route to becoming an industry top dog.
Undoubtedly, investors have really soured on the firm that formed from the merger of Tim Hortons and Burger King many years ago. The fast-food scene is crowded, and the two long-time legends may have lost a bit of ground to the likes of the industry newcomers.
After the hiring of Patrick Doyle, Restaurant Brands now has the tools it needs to become a fast-food icon again. Undoubtedly, QSR has its fair share of skeptics due to tough sledding for the Tim Hortons brand. In any case, I view QSR as an underdog with a lot to prove. And as recession pushes people toward budget-savvy food options, I think Restaurant Brands stock is a name that could surge as it vaults past muted expectations. Indeed, QSR could be a beneficiary of its past sluggishness. With a 3.3% dividend yield, investors will be paid to wait for the fast-food firm to finally make a dent in the industry with cherished brands polished up for the new age.
Alimentation Couche-Tard (TSX:ATD) may be a tough name to pronounce, but it’s one of the most enticing long-term earnings growers out there. The stock has been trending higher, even through 2022 was a down year for the broader U.S. markets.
In the new year, I think we’ll see more of the same from the firm. Further, I expect Couche to start making deals again while its cash hoard is large. The biggest hurdle that Couche could face as it eyes a large takeover is actions from regulators. Despite this, I expect the company can continue extracting value from deals, as it looks to prep convenience stores and gas stations for the modern era.
Couche-Tard’s in a roaring bull market. Yet shares are still trading like a value stock at 16.3 times price-to-earnings. Whenever you have a stock that gets cheaper as it moves higher, you could have an earnings growth king on your hands.