Today we’ve decided to add a company to our Bull List that we’ve been watching for a very long time, primarily because of its connection with one of our Canadian Foundational Stocks. But first, we’d like to comment on the current volatility in the markets.
This past week featured plenty of ups and downs in the markets. However, despite a U.S. jobs report that came in better than expected giving the markets a boost, it was still a rough week. The TSX Composite Index and the S&P 500 lost 3.03% and 3.29% of their value last week.
It seems the brief rally we had was simply a head fake as the markets are still very skittish. There was good post in Discord that talked about the length of bear markets. The source of the data was Yardeni Research which makes the data available free of charge. You can view the small report here, but below is the table in question (make sure you have images enabled):
Corrections are defined as declines of 10% or more while a bear market is 20% or more. As you can see, the current bear market began in early January and as of the linked report (mid-June) lasted for 164 days. We are now likely well over 200 days and marks the longest bear market since the Financial Crisis.
For many of you, this may be the first bear market you’ve experienced. While it can be unnerving, fret not as this too shall pass. That said, bear markets can last for years so patience will be required. This is not the time to be chasing speculative stocks. If one focuses on high quality companies at fair prices, the rest will take care of itself.
The most important thing to understand is that over the long term, accumulating stocks at cheaper prices is the path to outperformance.
So, bear markets should be welcomed. If you’re somebody who views investing right now as an opportunity and not a risk, you’re already ahead of the large majority of retail investors.
And, speaking of high quality companies, Alimentation Couche-Tard (ATD) reported earnings this past week. A staple on our Foundational Stock list over the past few years, the company did not disappoint. Earnings of $1.10 per share beat by $0.10 and revenue of $24.26B beat by 5% as it continues to deliver.
Alimentation is now returning 11.35% on the year, more than doubling the TSX Index which is sitting on a loss of 8.27% year to date. This is a great example of a company that isn’t flashy, but that can insulate your portfolio when the going gets tough in the broader markets.
New Bull List: Topicus (TOI.V)
It’s been a little bit since we added a stock to our Growth Bull List. As we’ve discussed many times, it is a difficult environment for growth stocks, and we didn’t want to just add any company to the list. We don’t like adding just for the sake of adding – let’s not force stocks on the list.
While it took us some time to find something we were comfortable adding, we felt it was as good a time as any to add Topicus.com to our list. We believe this is the first time we’ve added a TSX Venture stock to our list. However, with a market cap north of $5B and backed by arguably one of Canada’s best tech stocks (Constellation Software), this is no ordinary Venture stock.
Topicus is effectively a mini-CSU with a primary focus on the European market. Much like its parent company, you won’t get much in the way of insight into strategy or quarterly conference calls. As an investor, one must trust management.
Trust, which in our opinion the company has earned despite its very short stint as a publicly traded company. Since going public in early 2021, Topics has delivered strong growth despite a very difficult operating environment. In fact, it is very difficult to value the company on a historical basis since it has spent all its publicly traded life faced with a pandemic.
Trust, which the management team has garnered from the top brass at Constellation. So much so, that Topicus is the first (and thus far only) spinout by Constellation. While CSU is still very much engaged, their trust in the Topicus management team is notable and worth mentioning. On the flip side, it can be a risk as well. Since they are so intertwined, there is a risk that if relationships were to deteriorate, we could see performance impacted.
Topicus was spun out because it has the connections and expertise in the European market. This is effectively Constellation’s vehicle for European growth. With this in mind, it can also help retail investors with geographical portfolio diversification. While it trades on the TSX Index, it operates in Europe and reports in EURO. This is important to note because there will currency risk.
