2 Great Ways to Own Alimentation Couche-Tard Inc.

Alimentation Couche-Tard Inc. (TSX:ATD.B) is on a roll, up 15% in the past month alone and within 5% of its all-time high, prompting some to consider other alternatives to owning it directly.

| More on:

I feel for Alimentation Couche-Tard Inc. (TSX:ATD.B) shareholders. You poor souls. Your stock is only up 11.3% year-to-date through August 29. How are you going to be able to live with yourselves? Honestly.

I’m being facetious, of course.

While Couche-Tard’s usual hyper-performance hasn’t been present so far in 2016, its acquisition announcement August 22 of CST Brands Inc. has certainly lit a fire under its stock. As of August 29, it’s trading within 2% of its all-time high of $68.52. Couche-Tard is solidly on its way to an eighth consecutive year of positive returns. Any investor would kill for this kind of consistent performance from a stock.

The question is, Can that streak continue? My immediate reaction is to say, “Why not?”

Couche-Tard management has an ability to integrate acquisitions and secure operating efficiencies like few others. The future with CST Brands added to the mix, its largest acquisition in its history, continues to be very bright. It seems like only yesterday founder Alain Bouchard was opening the company’s first convenience store in Laval, Quebec.

Now a $38 billion market cap it’s significantly larger than well-known U.S. companies such as CBS Corporation and eBay Inc. Growth has been Couche-Tard’s calling card for some time. I expect that to continue.

That said, the company’s current valuation by almost every metric has it slightly overvalued. Is it a GARP (growth at a reasonable price) stock? Well, everyone’s version of reasonable is slightly different, but I don’t think you’d be far off the beaten path. It’s definitely not a value play, and this year’s slowdown would suggest it’s no longer the true momentum stock it once was.

Investors wanting to book profits might consider these two alternatives to owning Couche-Tard’s stock directly.

The first option is the BMO Low Volatility Canada Equity ETF (TSX:ZLB), a five-star fund according to Morningstar; it invests in the 40 lowest-beta stocks out of the 100 largest and most liquid Canadian equities. It’s intended to deliver reasonable returns while reducing the downside hit from a market correction.

Couche-Tard is currently the ETF’s ninth-largest holding with a weighting of 2.89%. It’s got some interesting large-cap stocks ahead of it, including one of my favourites, Fairfax Financial Holdings Ltd. (TSX:FFH), which checks in at 4.8% and is the largest holding in the ETF’s 40-stock portfolio.

The second option, in my opinion, is a more attractive investment to ZLB, but it might not be appealing to those who value geographic diversification. I’m speaking about the First Asset Morningstar National Bank Quebec Index ETF (TSX:QXM), a passive ETF that tracks the Morningstar National Bank Quebec Index, a group of 56 stocks whose market caps are in excess of $150 million and based in Quebec.

In this particular ETF, Couche-Tard is the largest holding with a weighting of 5.58%. While its performance has been slightly less than ZLB over the past three years on an annual basis—17.4% for ZLB versus 16.3% for QXM—it possesses the largest weighting for Couche-Tard of any Canadian-listed ETF. For those who believe in the power of Quebec businesses, it’s not a bad play.

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 Will Ashworth has no position in any stocks mentioned. The Motley Fool owns shares of eBay. Alimentation Couche-Tard and Fairfax Financial are recommendations of Stock Advisor Canada.

More on Investing

Canadian dollars are printed
Dividend Stocks

This 5.5% Dividend Stock Is a Cash Flow Machine

Are you worried about the future? Worry no more with this top dividend stock.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

I’d Put My Entire TFSA Into This 5.8% Dividend All-Star

If you're looking at a place to pop your TFSA contribution, stop right now and consider this dividend all-star.

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

A 4.9% Dividend Stock Paying Cash Every Single Month

Do you need cash on a regular basis? Then pick up this one while it's still a great price.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Wednesday, July 16

After a sharp pullback from record highs, the TSX may struggle for direction today as investors await U.S. wholesale price…

Read more »

Person uses a tablet in a blurred warehouse as background
Tech Stocks

1 Magnificent AI Stock Down 21% That Could Transform Your Portfolio

If you’re looking for a practical AI stock with strong fundamentals and untapped potential, Descartes might be the one to…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Stocks for Beginners

I’d Put All My $7,000 TFSA Contribution Into This Dividend Stock Right Now

If I'm looking to make some extra cash, then this dividend stock is my first stop.

Read more »

oil pump jack under night sky
Energy Stocks

Baytex Energy: Buy, Sell, or Hold in July 2025?

Baytex picked up a new tailwind in recent weeks. Are more gains on the way?

Read more »

Woman checking her computer and holding coffee cup
Energy Stocks

Whitecap Resources: Buy, Sell, or Hold in July 2025?

Depending on your risk tolerance and the size of your position to your portfolio, Whitecap Resources could be a buy,…

Read more »