2024 is turning out to be quite an interesting year for stock market investing. As of this writing, the S&P/TSX Composite Index is up by a whopping 14.55% from its 52-week low and 5.59% year to date. The Canadian benchmark index has been volatile over the last several weeks.
While the recent uptick might make investors feel hopeful, there is no telling when another sharp decline might hit the market. In a volatile market, many investors look for holdings that can protect their capital from the ravages of uncertainty.
In times like these, the stock of resilient businesses can offer the defensive appeal that risk-averse investors seek. To this end, Dollarama (TSX:DOL) and Alimentation Couche-Tard (TSX:ATD) can be good holdings to consider. Today, we will take a look at the two defensive retailers to help you determine which might be the better holding if you have to choose one.
Dollarama
Dollarama stock is a $29.46 billion market capitalization Canadian dollar store retail chain. Headquartered in Mount Royal, it has become the largest retailer in Canada for items priced $5 or less. It has over 1,500 locations throughout Canada, with most of them in Ontario.
There are two big things about the business that make it stand out: it essentially has a monopoly in the discounted retailer space in the country. Due to its business model, it continues seeing significant business come its way, even when people cut discretionary spending to save money.
Dollarama stock also owns a 50.1% interest in Dollarcity, a growing value retailer based in Latin America. The company’s earnings are recession-resistant. The business model it deploys means that Dollarama does not need to rely on mergers for growth. Its high-quality earnings and higher profit margins are enough to fuel its growth.
As of this writing, Dollarama stock trades for $105.69 per share, hovering near its all-time high valuation.
Alimentation Couche-Tard
Also called Couche-Tard, Alimentation Couche-Tard stock is a Canadian multinational convenience store operator. The company is much bigger than Dollarama, with over 14,300 locations across Canada, the U.S., Mexico, Ireland, and several other Asian and European markets.
Its global network spans over 25 countries, with several of its locations also offering transportation fuel. 65% of its transactions are as a traditional convenience store, with fuel accounting for a quarter of them. 10% of its transactions account for a mixture of the two.
While it has also delivered significant growth over the years, ATD stock primarily relies on mergers and acquisitions to drive its growth. In recent years, ATD stock has reduced its reliance on mergers and acquisitions to fuel growth, but that strategy still accounts for half of its growth.
While the underlying business might not have as high a margin as Dollarama does, Couche-Tard stock’s acquisitions tend to result in better upward share price movements. As of this writing, ATD stock trades for $86.27 per share, hovering near its all-time high.
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Foolish takeaway
Due to the sheer resilience of both underlying businesses, choosing one over the other can be difficult. If you look at how the two stocks have performed in the long run, Dollarama stock has delivered more growth to its investors than Alimentation Couche-Tard stock. However, the returns by both stocks over the last two or three years have been similar.
With both stocks fairly valued today, either can be a good fit to consider for your portfolio. If I had to choose, I would go for Dollarama stock due to its track record of more significant returns in the long run.
