In a previous article, I’d discussed the topic of investing in Canada, and the structure of the market was made clear: Canada has only a few major competitors in certain major industries that have made many investors very wealthy. As is often the case, the world’s most successful investors have taken notice and, in many instances, invested early on and continue to do so.
Warren Buffett has done a fantastic job of investing in unique assets or in companies that have very few competitors. When buying in to companies such as Burlington Northern (a railway) and Flying J (truck stops), it is clear that these companies have a unique footprint that will be extremely difficult to replicate. In addition, economies of scale are also a major profit driver.
For investors willing to combine this approach with the concentrated Canadian market, there are a number of companies that may be next for Warren Buffett to take a major stake in or preferably to buy altogether. As a reminder, it has been close to one year that the Oracle of Omaha came to the rescue of alternative lender Home Capital Group, which may have a been a test run of bigger things to come.
The first potential takeover target follows the same premise of truck stop operator Flying J. At a current price of $54 per share, Alimentation Couche-Tard Inc. (TSX:ATD.B) has a market capitalization of no less than $30 billion, which is less than US$25 billion. With a little debt to close the deal, the economies of scale created by this acquisition could pay huge dividends to Berkshire Hathaway Inc.
The second name on the list is Telus Corporation (TSX:T)(NYSE:TU). In spite of Telus being part of an industry that is heavily regulated (in terms of competition and ownership), it may be time for the federal government to open the door for more competition. After all, more competition means lower prices for Canadians. Why wouldn’t we want this?
The last name on the list is none other than Enbridge Inc. (TSX:ENB)(NYSE:ENB), which, in spite of being essential to the running of many Canadian households, is a prime type of “Buffett stock” that has an extremely high probability of delivering consistent, above-average returns to shareholders over a long period of time. What makes it so attractive for long-term investors is the defensive nature of revenues and earnings in addition to the high dividend yield. Canadians don’t need to own the entire company to benefit. Instead, they have the opportunity to own shares for as little as $40 and grow alongside the company. The performance of this company has been far above average over the past decade. Why not go along for the ride for the next decade?