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Alimentation Couche Tard Inc.: Growth at a Discount

Alimentation Couche Tard Inc. (TSX:ATD.B) is a fantastic growth-by-acquisition story that is far from over. The incredible management team is value oriented, and they know the ins and the outs of the convenience store business. The company generates huge long-term value for shareholders by making strategic acquisitions and driving synergies through the roof. This is a proven strategy that drives the earnings per share over the long haul, and I think there’s still a ton of room to run for the convenience store juggernaut.

The convenience store industry is really fragmented, so the sky is the limit when it comes to growth prospects. Couche Tard owns convenience stores and gas stations all around the world from the booming U.S. market to the intriguing Scandinavian market. If you’re looking for pure growth with an international twist, then Couche Tard could be your one-stop shop.

The stock has slowed down over the past year; many stocks in the Canadian defensive sector experienced a slowdown. There’s no question that Donald Trump will give the American economy a boost, and businesses with U.S. exposure will be the ones to own over the next few years. Couche Tard has a huge presence in the U.S., but why has the stock slowed down in recent months?

Defensive stocks have gone out of favour with the average investor since Trump won the presidential election. The general public has suddenly become bullish, and they’ve loaded up on cyclical stocks, which will provide the most upside from a cyclical upswing caused by a strengthening U.S. economy.

Sure, you’ll get the most out of your returns by being in cyclical stocks when the market moves higher, but that doesn’t mean you should dispose of your defensive stocks, especially if the businesses your dumping are doing well.

I think the defensive sector slowdown is an opportunity to pick up shares of Couche Tard at a huge discount to its intrinsic value. The stock slowed down, but the business has not. Couche Tard just came off one of its largest acquisitions to date, and there will be a ton of synergies to be unlocked over the next few quarters.

Couche Tard is an earnings-growth king which is set to become a dominant industry leader over the next decade. Going forward, the company is expected to make more acquisitions to drive long-term earnings, but don’t sell the stock if acquisitions are few and far between. The management team has value on their mind, and they will not make an acquisition just to keep investors happy.

If you’re a long-term investor looking for growth at a discount, then Couche Tard is a screaming buy at the $62 level.

Stay smart. Stay hungry. Stay Foolish.

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Fool contributor Joey Frenette owns shares of Alimentation Couche Tard Inc. Alimentation Couche Tard Inc. is a recommendation of Stock Advisor Canada.

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