It’s easy to give up hope that 2023 could be a better-than-expected year. The odds of a recession are high in the new year, and the Federal Reserve continues hiking interest rates, even with the latest U.S. consumer price index (CPI) report that came in lighter than expected. Could it be that the Fed is causing more damage than is needed, as investors fear the impact of this year’s rapid-fire rate hikes?
Though the cooler CPI numbers give central banks more wiggle room, I think the Fed is wise to stay the course, not giving inflation any hope of coming back. Sure, markets won’t like the tone of the Fed. However, the Fed can always hike now and cut later after there’s greater assurance that inflation is returning to normalized levels.
Atop my Tax-Free Savings Account (TFSA) wish list for the new year are shares of Alimentation Couche-Tard (TSX:ATD) and Jamieson Wellness (TSX:JWEL). I’m not chasing battered tech stocks quite yet. Instead, I’m more than content with the proven earnings growers, as a recession meets lingering inflation to form stagflation conditions.
Couche-Tard makes a strong case for why it should be one of your top five holdings. The stock has crushed the TSX Index over the past five years, delivering more than 270% in gains. Ambitious growth plans alone did not drive these gains. Earnings growth and prudent moves have helped Couche-Tard support its rally. In an era of higher rates, it’s profits that support rallies. And with Couche-Tard stock, you’ll get no shortage of powerful earnings growth over time and resilient cash flows.
With a balance sheet that’s getting fatter by the day, one has to think management is nearing its next blockbuster deal in the convenience store space. Though I have no idea where Couche will put its cash pile to work, I know it’ll make a deal that’ll help produce huge synergies, which will translate to share price appreciation.
Simply put, you’re in good hands with Chief Executive Officer Brian Hannasch and its founder Alain Bouchard. These are some of the smartest managers in the business. Those who invest in them are likely to continue doing very well through bad times and good. At 16.1 times trailing price to earnings, ATD stock is a steal in my books. I plan to buy more shares come TFSA top-up time.
Jamieson Wellness is another boring company that’s become beautiful in this choppy environment. The company is best known for vitamins with green caps on them. Over the course of a century, Jamieson has built brand affinity with Canadians. As the company looks to China for next-level growth, investors should gain a better appreciation for the type of low-risk (or low-tech) growth that the firm is capable of.
Jamieson is one of the most appealing Canadian brands out there. As the company uses Kinaxis to beef up its supply chain, I think that’ll be tough to stop JWEL stock in its tracks. The growth runway is long. And management has the expertise to get things done as the Canadian success story looks to thrive on a more global front.
On a terrible day for Wall Street (the S&P 500 sank 2.5%), JWEL inched higher by 0.6%. As the bear market moves on, I expect more calm as the rest of the market panics over recession or other exogenous issues. At 28.95 times trailing price-to-earnings, shares aren’t cheap, however.
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* Returns as of 12/13/22
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Fool contributor Joey Frenette has positions in Alimentation Couche-Tard. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Kinaxis. The Motley Fool has a disclosure policy.