RBC just raised its bet on this 'recession resistant' Canadian stock, giving it 20% upside

Published Tue, Sep 5 20237:54 PM EDT

RBC has raised its bets on convenience store operator Alimentation Couche-Tard , doubling the weighting of the stock in its "Focus List: Fall 2023" bucket to 5%. The company, along with 26 other stocks, were also on RBC's "Summer 2023" list. Although the bank's stock list has underperformed over the past six months, it has historically and consistently beaten its benchmark S & P/TSX Index . The RBC Strategy Canadian Focus List returned 11.3% in compounded annual growth over the past five years. In contrast, the benchmark has risen by 7.8% on the same metric. Alimentation Couche-Tard Despite a challenging economic environment, RBC believes Couche-Tard can still grow by improving procurement practices, adjusting product pricing, controlling costs, and expanding its store network. The investment bank said the stock's valuation forecast merits its 87 Canadian dollar ($63.82) price target, indicating a 20% upside. "The [adjusted earnings] multiple is consistent with the average of the five-year range, reflecting overall sector valuation trends, and supported by ongoing strong normalized underlying performance, relatively recession resistant business model, and benefits from prior-period merger and acquisition," said RBC Capital Markets' analyst Irene Nattel in a note to clients on Sept. 1. The stock is also the largest holding in the iShares S & P/TSX Capped Consumer Staples Index ETF , the only exchange-traded fund that's posted gains yearly for the past decade . ATD-CA 5Y mountain Waste Connections RBC also doubled its weighting of U.S.-firm Waste Connections to 5% in its "Focus List: Fall 2023" bucket. The bank said it remains a core holding due to its "disciplined capital deployment." The investment bank expects the stock to rise by 14% to $159 over the next 12 months. While revenue growth may slow over the next five years due to the company's size, RBC analysts say "core trends remain healthy" and the acquisition environment should stay "robust" through 2023. Waste processing is one of the few sectors where, even if prices move lower, there would not be a resulting lift in volumes, unlike car manufacturing, for example. As such, companies in the sector grow by taking market share from competitors or through acquisitions. WCN 5Y line