The Motley Fool

3 Reasons to Buy Canadian Tire Corporation Ltd.

Shares of Canadian Tire Corporation Ltd. (TSX:CTC.A) have been on a fantastic run—over the past three years, the company’s stock price has roughly doubled.

Does that mean it’s too late to buy this stock? Well, not necessarily. Below are three reasons to add Canadian Tire to your portfolio.

Insulated from oil

If you’re like me, you don’t want anything to do with the oil industry. The rout in prices has devastated many energy producers, and the news could easily get worse. Iran may sign a nuclear deal before too long, which would allow the country to export more oil, and storage capacity is running out in the United States.

Unfortunately, these issues have a lot of spillover effects (no pun intended). Just look at Canada’s latest GDP numbers, which showed that our economy shrank by 0.1% in January. So, all companies on the TSX seem to be at risk.

Canadian Tire is an exception. It is generally considered a low-cost chain, so consumers may be drawn to the stores when times are tough. Better yet, low oil prices may encourage more driving, which equals more maintenance work at Canadian Tire stores. Finally, if the economy really suffers, people may be encouraged to repair their old cars at Canadian Tire rather than buy new ones.

The right kind of growth opportunities

I know what you’re thinking: What kind of growth opportunities does Canadian Tire have? Aren’t there enough stores in Canada? Do they have to expand into the United States?

Fortunately, Canadian Tire can grow in other ways: it can continue to grow its Sportchek banner; it can open up smaller stores in downtown locations; and there’s still a lot of work to do to grow online sales.

One thing Canadian Tire will not do is expand into the United States. The company has tried this twice before, and each time it fell flat on its face. So, investors shouldn’t have to worry about another attempt.

A friendly environment

Let’s go back a couple of years. At the time, Canadian Tire was facing a very uncertain environment. Target Corporation was entering Canada and in response, Wal-Mart was planning a big expansion. Meanwhile, everyone was still afraid of Amazon.

Since then, the environment has gotten a lot friendlier. We all know that Target has pulled out of Canada, and there have been others too. The Sony store is gone, as is Future Shop, both of which competed with Canadian Tire for electronics sales. And Sears Canada has been in retreat mode.

Notably, Wal-Mart has stopped offering unlimited free shipping on online orders, citing the fact that competitive pressures are less intense. So, I would expect many more positive years for Canadian Tire as well.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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 Benjamin Sinclair has no position in any stocks mentioned. David Gardner owns shares of Amazon.com. The Motley Fool owns shares of Amazon.com.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.