There’s no doubt that one of the most effective investing strategies is to find a high-quality stock like Dollarama (TSX:DOL) to buy and hold for years. Long-term investing not only helps mitigate short-term risks and uncertainty, making it a safer approach, but it also allows you to benefit from the power of compounding, which can significantly grow your investment over time.
For instance, if you had invested in Dollarama stock at the start of 2010 – approximately 14.7 years ago – the value of your investment would have soared. During this period, Dollarama stock delivered a total return of 3,482%, representing a compound annual growth rate (CAGR) of 27.6%, one of the most impressive growth rates in Canada.
Achieving 27% growth in any single year is already outstanding, but maintaining that level of performance consistently for nearly 15 years is what truly sets Dollarama apart as one of the best stocks on the TSX. It also highlights the potential of long-term investing, especially when you choose the right stocks.
If you had invested just $1,000 in Dollarama at the start of 2010 and held it until today, your investment would now be worth over $35,500. A $2,500 investment would be worth more than $89,000. That’s a remarkable return by any measure.
Looking ahead, Dollarama still offers significant growth potential and remains a compelling investment. However, identifying high-quality stocks early on is crucial to fully capitalize on their long growth runways.
So, with that in mind, here’s why Dollarama is one of the top stocks in the market and what qualities you should look for in your next long-term investment.
What’s made Dollarama stock one of the best on the TSX?
There are several important qualities that have led to Dollarama’s rapid and consistent growth over the years to look for in your next investment.
First, though, and one of the most important reasons Dollarama has had so much success is due to its business model and value proposition.
Dollarama offers a wide range of products at low prices, which attracts price-conscious consumers, especially during economic downturns. As a discount retailer, Dollarama benefits from steady demand in any market environment, but its appeal often increases when economic conditions worsen.
Therefore, it’s crucial to find stocks whose business models consistently generate strong demand, and even if they don’t excel through economic downturns, they should at least be quite resistant to these periods.
Another major factor in Dollarama’s impressive growth has been its high-quality management team, which has consistently executed its strategic goals.
While Dollarama’s business model is a key driver in the growth of the company and brand, the company’s ability to consistently expand its store count, improve its merchandising, build a highly efficient supply chain, and successfully shift to higher price points have all been crucial components in growing its company to a market cap that’s now more than $35 billion.
And now, as its growth naturally slows down in Canada due to its sheer size, Dollarama is already looking to the future and pivoting with its investment in the Latin American dollar store chain, Dollarcity.
Where can the discount retailer go from here?
Although Dollarama is still seeing growth in Canada, the larger it becomes, the harder it will be to continue achieving that growth. That’s why it’s looking to diversify its operations with its investment in Dollarcity.
For example, in its most recent quarter, although Dollarama opened 14 new stores in Canada and achieved same-store sales growth of 4.7%, that’s lower than it’s been in the past as operations begin to normalize after the significant inflation we saw in the last two years.
This makes the growth from Dollarcity even more critical. In its most recent quarter, Dollarama also reported that its equity income from Dollarcity nearly doubled year-over-year, showing that Dollarama’s investment in the Latin American market is paying off.
Therefore, with Dollarcity continuing to expand and planning to enter the Mexican market next year, Dollarama should continue to see further years of significant growth ahead.
So, while Dollarama remains an excellent stock with strong growth potential, the key to finding your next long-term investment lies in choosing companies with proven business models, reliable management teams, and the ability to grow their operations consistently and expand into new markets.
