Shares of Alimentation Couche Tard Inc. (TSX:ATD.B) jumped nearly 3.6% today on news that the company won the U.S. antitrust approval to purchase CST Brands Inc. (NYSE:CST). There is one small condition though: Couche Tard must sell about 71 of its stores across eight U.S. states.
This deal is a breath of fresh air for the convenience store operator which has ambitious plans of consolidating the fragmented industry around the globe. I believe the post-announcement rally was warranted, and that Couche Tard could be on a sustained rally to higher levels from here.
CST Brands deal close couldn’t come at a better time
The CST Brands deal is expected to finally close later this month and is expected to be a huge booster of the top-line in the medium- to long-term. The deal really beefs up Couche Tard’s already solid U.S. presence, making the company one of the major Canadian beneficiaries of the strengthening U.S. economy under the Trump administration.
The deal couldn’t have come at a better time. Everyone, including long-time bearish investor Prem Watsa, is bullish on Trump and his ability to give the U.S. economy a much-needed spark, which will give the Canadian economy a nice bump as well.
The bull market has been going strong for quite a while now, and a correction is long overdue, but if Trump can deliver on his promises, it’s possible that this bull market will find new legs and that much-anticipated correction may have been pushed a few years into the future.
The general public are so bullish in the “Trump Bump” that many investors have been dumping their defensive holdings in favour of cyclical names to get the most profit from the upcoming cyclical upswing.
For those that have been dumping Couche Tard, I believe this is a huge mistake, especially considering that the company is set to ride huge tailwinds in the increase of consumer spending that comes with a strengthened U.S. economy.
More consumer spending means people will be more likely to splurge at convenience stores, which will result in a earnings bump and a sustained rally in shares of Couche Tard.
Huge opportunities in the Asian markets
It’s not just the U.S. locations that will act as a tailwind in the coming years. The Asian market is an area which will allow the company to grow at a compound annual growth rate (CAGR) in the double digits. Vietnam, the Philippines, Indonesia, Malaysia, and India are expected to see CAGRs well north of 10%.
These are huge markets that will allow Couche Tard to continue to grow at its impressive rate for many years to come. Although the stock has slowed down, growth certainly has not. Couche Tard is my largest holding, and I will continue to add on any further signs of weakness going forward.
Growth investors looking to grab a fantastic company at a discount to its intrinsic value should strongly consider picking up shares of Couche Tard today before they break out.
Stay smart. Stay hungry. Stay Foolish.
