There’s no question that the markets have been volatile lately. Whether it’s the election or the Fed threatening to raise rates, there will always be a reason for investors to panic. Nobody expected that the Dow and the TSX would be hitting 52-week highs after a Donald Trump won the election to become the next president of the United States. The fear gauge was through the roof, yet despite many pundits predicting a market correction, the contrary actually happened.
That’s why it pays to be a contrarian when investing, and sometimes it pays to turn off the noise. As an investor, your job is to pick fantastic stocks with durable competitive advantages at huge discounts to intrinsic value. When the media makes speculative statements, like those experienced before the election, it can cause investors to lose track of long-term goals, which is to maximize returns while reducing risk.
As Charlie Munger once said, to be a great investor you “[b]uy stocks and sit on your ass,” meaning once you buy, you hold it and do nothing. This is how you generate long-term returns–not by jumping in and out of the market every time a bad news happens.
As the markets slowly climb to new highs, there is one stock on the TSX that I believe is a true forever company that will continue to outperform for years to come. The business is a typical Charlie Munger business, and you can hold it for many years down the road.
I’m talking about Alimentation Couche Tard Inc. (TSX:ATD.B), which I believe is a fantastic growth stock that is resistant to recessions. Despite having an impressive performance the last few years, I still believe the stock is just getting started.
The managers are true “Buffettarians”; they only acquire companies where there is the opportunity to bring value to shareholders. The management team is very capable and will continue to deliver very strong results through synergies on future acquisitions.
The convenience store business is still very fragmented, and it’s nowhere close to being saturated. This is where Alimentation Couche Tard has the opportunity to grab the convenience store industry by the horns. Growth is nearly unbounded, and the growth strategy is based on value principals.
I have no doubt that Warren Buffett would approve of this company, especially since it has a huge moat in the large number of stores it owns in areas where it can deliver a huge return on equity. Earnings continue to climb year after year, and the stock price will follow shortly.
Given the earnings growth and potential of the company, I believe shares are a steal right now. The stock trades at a 21.5 price-to-earnings multiple, which is considered deep value in an environment where it’s difficult to find value, as markets continue to climb to new highs.
I would pick up shares now. There is a huge margin of safety involved at current levels. The median price target is $78 a share, which is a whopping 25% of upside from current levels, not including dividends.
