For long-term investors, all you need are great investment ideas and the patience to hold onto them for decades at a time to strike it rich. If you’ve got decades to invest, invest with that time frame in mind rather than seeking to maximize your short-term returns with zero consideration for the risks you’ll bear.
Beating the markets isn’t easy, but it can be done by self-guided investors who have the temperament to stay out of their own way by not timing the markets or panic-selling just because those talking heads on TV are bearish. If you’re not going to formulate your own thesis and have conviction in it, you’ll just act based on what the next talking head will tell you, and your results are probably going to be less than stellar over the long run.
These days, the definition of what it means to be a long-term investor has changed. Depending on who you ask, a long-term horizon could be as short as a year. If you’re looking for stocks that are positioned to outperform over the next 12 months, then the recommendation in this piece probably isn’t right for you, as it’s based on secular growth stories that could take years, if not decades, to play out.
A multi-bagger in the making
If you’re a long-term investor looking to put the TSX Index to shame over the next five to 10 years, however, you may want to consider scooping up the following stock that I believe has the potential to become a significant multi-bagger.
Without further ado, consider Alimentation Couche-Tard (TSX:ATD.B), a low-tech, easy-to-understand convenience store company that’s grown its earnings at an above-average rate over the years thanks primarily to prudent M&A activities. Couche arguably has the best management team in a niche industry that’s ripe for consolidation.
With a world of acquisition opportunities to be had from the still very fragmented global convenience-store space, Couche has the means to continue growing its earnings at a high double-digit rate over the next decade and beyond, despite being a large firm with a $48 billion market cap.
Couche-Tard: A rare breed, indeed
When most firms mature, the growth tends to grind to a halt, as they transform a growth play into a stalwart. Companies can try to resist the pressures facing growth, but most of them fail, as competitive forces and maturing markets weigh on a firm’s growth efforts. Some maturing firms compromise on return on invested capital (ROIC) numbers to reinvigorate their top-line growth rates over the short term to the detriment of shareholders.
Indeed, it’s hard to keep growth rates high as a maturing company. But Couche is a rare breed of firm that can sustain a high growth rate, despite its size. And it’s not magic. Couche has a management team that’s well-versed in producing value (via synergies) from every acquisition it makes while continuing to keep organic growth numbers high. The results? They speak for themselves. The company has maintained high ROIC numbers over the years while retaining a top-line growth rate in the double digits.
Long-term ROIC catalysts that could further accelerate Couche’s earnings growth potential
Moreover, as the firm spreads its wings across higher-ROIC markets (potentially in the Australasia region), the firm could continue growing at an above-average rate, as its ROIC numbers stand to expand sustainably.
And let’s not forget about the budding cannabis market. If Couche were to ever get the green light to sell cannabis at its stores, both top-line and ROIC numbers could get a sustainable jolt that could result in massive value creation for shareholders who stay the course, despite the “noise” that’ll cause shares to fluctuate or stagnate over the short term.
