Forget Bitcoin, Forget Marijuana. Here’s a Slow and Steady Stock That's Creating Shareholder Wealth Consistently

Forget Bitcoin, Forget Marijuana. Here’s a Slow and Steady Stock That’s Creating Shareholder Wealth Consistently

Richelieu Hardware Ltd. (TSX:RCH) investors can expect consistency and stability, while Canopy Growth Corp. investors are in for a wild, painful ride.

Karen Thomas, MSc, CFA

Karen is a stock market enthusiast focused on uncovering those stocks that she believes the market has mispriced. She does this through fundamental and quantitative analysis of companies and their industries, as well as a study of future opportunities and trends. She holds a Masters degree in Finance, the CFA designation, and has over 20 years of experience in the investment management industry. Having worked at a major pension fund, as well as two leading mutual fund firms as an analyst and portfolio manager, she has solid investing expertise which she aims to share with her readers.

Published January 27, 2018 7:34 pm EST

These days, slow and steady doesn’t seem to garner much attention.

Nevertheless, here’s a company that should capture investors’ attention for its strong and consistently impressive returns and value creation.

Richelieu Hardware Ltd. (TSX: RCH) is a $1.8 billion company, a leading North American distributor, importer, and manufacturer of specialty hardware and complimentary products with a history of stable and top-notch results that are worthy of our attention.

No sleepless nights

Richelieu’s stock has a 10-year return of 459%, a five-year return of 144%, a three-year return of 66%, and a one-year return of 14%. The stock has followed a consistent and stable rise.

And this does not include dividends, which totaled $4.00, $2.12, $1.04, and $0.23 per share for each period, respectively, bringing the total return numbers higher.

The company continues to report strong sales, earnings growth and returns, and with a healthy balance sheet and a management team that keeps its focus on returns on investment and return on equity, the stock is a good bet.

Riskier propositions

Let’s compare and contrast that to the performance of bitcoin in the last year, or even to one or more of the marijuana stocks in the past year.

Bitcoin’s performance, as we know, has been spectacular and erratic, exciting and nerve-racking. Bitcoin has a one-year return of approximately 300%.

But if we look a little more closely at the chart, we can see that the price has been wildly erratic, meaning sleepless nights for sure. And in hindsight, we may assume that investors bought low and sold high, but with this kind of chart, there are certainly investors who have also lost a lot of money in the frenzy.

Marijuana stocks have been soaring off strong revenue growth, but also off very optimistic investor sentiment that has been taking the shares to levels that some, including me, are calling bubble territory.

Canopy Growth Corp. (TSX: WEED), for example, has a one-year return of 216%, and its stock keeps rising as investors appear to be ignoring some of the very real risks involved in this business, including uncertainty related to legalization, government regulation, ultimate demand, and the returns in the business.

Finally, while the charts look phenomenal for these investments, and we therefore automatically assume that everyone is making money, we don’t hear about the investors who bought high and sold lower in a fear-induced trade, thereby losing money.

Right now, bitcoin is falling to $10,000 after hitting highs of over $20,000 just a couple of months ago.

While they may not feel as exciting, better ideas are everywhere.