Slowing Economy Won't Stop My Investment in Dollarama and Waste Connections
Canada's economy has been experiencing a slowdown in growth, with the Bank of Canada expecting a GDP increase of just 0.7% this year. However, this doesn't necessarily mean that a recession is inevitable.
The unemployment rate remains at 6.4%, and employment fell by 42,000 jobs in August. Despite these numbers, consumer spending still occurs, but it shifts towards everyday products rather than expensive purchases.
To invest in companies during an economic slowdown, the author looks for businesses that sell necessities or solve problems customers can't ignore. Two stocks fit this description: Dollarama (TSX: DOL) and Waste Connections (TSX: WCN).
Dollarama operates 1,734 stores across Canada, with expanding businesses in Latin America, Mexico, and Australia. The company's value proposition becomes especially useful when household budgets tighten.
In the latest quarter, Canadian comparable-store sales increased by 5.4%, driven by a 3.7% increase in transactions. Diluted earnings per share rose 11.2% to $1.29. Management responded by increasing its Canadian comparable-store-sales guidance and lifting expected new store openings.
The author notes that Dollarama isn't cheap, trading around 34 times forward earnings at $178.40. However, the company's value-focused model could become even more useful during an economic slowdown.