3 Stocks for the Long-Term Investor

These three companies are in it for the long term and you should be too.

| More on:
The Motley Fool

With indexes at all-time highs, should you be trying to find the next 10-bagger? Wouldn’t you rather own a boring company that just keeps going up year after year over the roller coaster that speculative growth stocks expose you to?

Below are three companies that might not be the most entertaining to talk about at your next barbecue, but will most likely outperform any speculative growth stocks in the next decade.

National Bank of Canada

National Bank of Canada (TSX: NA) is not the biggest of our financial institutions, but it is very profitable nonetheless. With a return on assets of 0.8% and a return on equity of 18.9%, it is in an excellent position to increase its earnings when interest rates creep back up. Unlike the average company, banks should be valued at a price-to-tangible book value ratio — that is, the price divided by the book value of the assets per share minus any goodwill — rather than on a price-to-earnings ratio basis.

With the price-to-tangible book value ratio, lower is better, and National Bank’s P/TBV value of 2.59 is much lower than competitors Royal Bank of Canada (TSX: RY)(NYSE: RY) and Toronto-Dominion Bank (TSX: TD)(NYSE: TD) at 3.17 and 3.02, respectively. Moreover, at current prices National Bank’s dividend yield of 4.24% is the highest of its peers.

Alimentation Couche-Tard

It is undeniable that what Alimentation Couche-Tard (TSX: ATD.B) managed to accomplish in the last 30 years is one of the best business successes coming out of Canada. Starting from only one convenience store in Quebec to owning more than 8,500 stores worldwide in such a competitive industry speaks for itself.

After a successful entry into the United States, the company recently acquired more than 2,500 stores from Statoil (NYSE: STO), increasing revenues by almost 50% and giving it access to the European markets. Success in the north of Europe would give the legitimacy management needs to increase its footprint on the old continent.

Right now there is a discount on the stock due to the recent acquisition; nevertheless, Alimentation Couche-Tard has proven that it can operate in foreign countries, evidenced by its success in the United States. There is no doubt in my mind that management will have success in Europe and sooner or later the market will realize the potential that Western Europe can offer. The growth story is not over at this convenience store.

ShawCor

Our third and final long-term play is ShawCor (TSX: SCL) — an energy services company for the oil and gas industry that in recent years has seen some pressure from the market due to the challenging economics of the industry. Nonetheless, ShawCor is an exceptional operator and while the oil industry is a cyclical one, the secular trend in energy is positive, as evidenced by the increasing investments that integrated oil companies are making in replenishing their proven reserves.

With an operating margin of 17% and a return on capital of 22%, management of ShawCor knows how to operate in a harsh environment. With a low debt-to-assets ratio of 24%, the company can easily weather a longer cyclical downturn.

These stocks are boring. Their businesses are redundant and have barely changed in the last decade, but they make money and lots of it. With this trio, you’ll own a robust dividend yielder with National Bank, healthy growth with Alimentation Couche-Tard, and a defensive value play with ShawCor. As investors, what more can we ask for?

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor François Denault has no positions in any of the stocks mentioned in this article.

More on Investing

woman analyze data
Dividend Stocks

The Smartest Dividend Stocks to Buy With $1,000 Right Now

Do you have some cash to invest but want to earn a safe, low-risk dividend return? These dividend stocks are…

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

What to Know About Canadian Mining Stocks for 2025

Several factors, including global economic stability and trade policies, could play an important role in driving Canadian mining stocks in…

Read more »

An investor uses a tablet
Dividend Stocks

5 Canadian Dividend Stocks I Think Everyone Should Own

These Canadian stocks have a solid track record of dividend growth and offer compelling yields near their current market price.

Read more »

calculate and analyze stock
Dividend Stocks

This 4.4% Dividend Stock Pays Cash Every Single Month

This high-quality Canadian dividend stock offers an attractive yield and plenty of long-term growth potential.

Read more »

edit Safe pig, protect money
Dividend Stocks

3 TSX Dividend Aristocrats That Can Weather Any Economic Storm

Market volatility has investors wondering which stocks can withstand an economic storm. Here are three to consider today.

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

2 Cheap-Looking Stocks to Could Win in the AI Revolution

It's about time we gave firms like Thomson Reuters (TSX:TRI) a bit more of an AI premium.

Read more »

up arrow on wooden blocks
Stocks for Beginners

1 Under-the-Radar Canadian Stock That Could Soar From Trump’s Tariffs

Not all Canadian stocks are at risk from Trump's tariffs, and this one could be a winner.

Read more »

people relax on mountain ledge
Dividend Stocks

Top Canadian Stocks to Buy for Passive Income 

Are you building a passive income portfolio that can beat inflation and provide higher purchasing power? You could consider buying…

Read more »