This e-Commerce Play Could Be the Best Company on the TSX

Perhaps the widest moat stock on the TSX, Cargojet Inc. (TSX:CJT) is a top pick of mine for serious long-term investors.

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The variety of ways investors can gain exposure to the e-commerce sector are many. Beyond buying existing e-commerce providers such as, Inc. (NASDAQ:AMZN) or e-commerce solutions/platforms such as Shopify Inc. (TSX:SHOP)(NYSE:SHOP), buying into real estate investment trusts (REITS) that provide warehousing solutions directly or indirectly for massive e-commerce companies is yet another way to go.

The transportation side of the e-commerce revolution is however, something that is often overlooked by many, as we all expect packages to magically appear at our doorsteps in as little as a few hours. Beyond building up in-house fleets of airplanes and trucks (which companies like Amazon are doing like crazy), relying on third-party providers to get your special package from point A to point B in as little time as possible is what many companies have become very good at.

In Canada, one company owns approximately 95% of the domestic air cargo market – an essential monopoly on the Canadian lightning-fast transportation network. Cargojet Inc. (TSX:CJT) is a heck of a company, with a moat the size of the Pacific and Atlantic oceans combined.

With the Canadian overnight market all but locked up and an average contract with customers of approximately seven years, Cargojet has found a way to insulate its future cash flows in a way most other companies can only dream of. Other than being the only option for companies looking to ship goods next day, Cargojet has also built a business model requiring prepayment with the vast majority of its customers paying in full before the goods leave the warehouse.

Additionally, the significant size of Cargojet’s current fleet offers investors barriers to entry that are sufficiently large to ensure Cargojet will remain the only player (of any meaningful size) in this market for the foreseable future. The transportation network the company has put together, along with the massive amount of capital needed to build up the company’s fleet, has led to a scenario in which investors can (in my opinion) forecast cash flows with as much certainty as is possible in the world of finance, a very attractive prospect for long-term investors looking for safe companies to invest in for decades.

No moat is unbreachable, and while Cargojet is likely to face pressure to expand globally (the company has operations in Europe and Central America) due to the relatively limited size of the Canadian market relative to other global markets yet to be explored, this is a company I have been seriously considering as a long-term investment for some time now due to the fantastic economics of the company’s underlying business.

At its current valuation multiple, Cargojet may not appear cheap. That said, take a look at Amazon or Shopify’ valuation levels and tell me if I’m the crazy one.

Stay Foolish, my friends.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Amazon, Shopify, and SHOPIFY INC. Shopify is a recommendation of Stock Advisor Canada. Fool contributor Chris MacDonald has no position in any stocks mentioned in this article.

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