There are several strategies you can use to invest in the stock market. For sustainable success, adopting a well-thought-out and long-term investment strategy can be the best way to approach stock market investing. By investing in and holding stock of high-quality businesses, you can set yourself up for significant long-term gains.
While the TSX offers several high-quality stocks, only a few offer stellar but reliable wealth growth potential. As a top defensive business, Dollarama (TSX:DOL) is a Canadian discount retailer that can fit the bill.
Dollarama stock has been a massive growth stock for over a decade. Investors of the $23.86 billion market capitalization retail store chain have seen substantial returns on their investments in Dollarama stock. In the last decade, Dollarama stock has returned over 600% to its investors, reflecting a 21.5% compound annual growth rate (CAGR).
As of this writing, Dollarama stock trades for $83.74 per share. It is up by 15.87% in the last 12 months and by almost 5% year to date. Despite delivering such stellar returns, Dollarama stock might be worth buying as a long-term investment today. The stock’s incredible growth in the last 10 years shows why it is one of the most impressive buy-and-hold investments in Canada right now.
Dollarama stock’s recent returns have been fueled by inflation. As consumers try to reduce discretionary expenses to adapt to higher costs of living, the discount retailer’s business has boomed. The last four quarters have seen Dollarama stock’s revenue increase by around 17%. That said, you can argue that the stock could be a little expensive to buy today.
With inflation slated to subside this year, there is a realistic possibility of Dollarama stock’s share prices declining. If the normalizing economic situation impacts its sales, the stock could become cheaper over the next few quarters.
While rising inflation has been a major tailwind in Dollarama stock’s sails, it might not be the only factor to fuel its growth in the long run. Granted, an improving economic environment might reduce the demand for discounted products. Still, it is also possible for consumers to stick to their new spending habits.
Economically speaking, it would make sense for consumers to continue buying essentials at discounted rates. After all, the more money a person can spend at discounted retailers, the more they can save for discretionary expenses. Additionally, many analysts believe that there is a recession waiting on the horizon.
Similar to market downturns, recessions also impact consumer spending power. Such situations benefit companies like Dollarama. We have already seen a major boost to the stock in 2008 amid the financial crisis. It means that Dollarama stock may have more growth in store if another recession hits the market later this year.
While not without risks, Dollarama stock can be a good investment to consider for your self-directed portfolio. If you have a well-balanced portfolio, it might be worth allocating a portion of your investment capital to the discounted retailer stock.