It’s tough to be a growth investor in this environment, with some of the most promising growth-heavy Nasdaq names taking on most of the damage in the recent, heated summer market selloff. Indeed, it’s impossible to tell when the selling pressure will end and when they’ll reverse course.
Remember, making money in the near term by trading stocks is very hard, even for seasoned pros. However, building generational wealth over the span of decades can be pretty simple, provided you stay out of your way and do not let your emotions dictate your decisions.
Trading and investing are two different games. With that, they have two sets of rules that market participants should follow. Regarding investing, patience, discipline, the ability to stay calm in bear markets (or market corrections), and plenty of homework are required.
It is difficult to make (or save) sizeable sums of money by selling in the heat of a panic.
Often, you could forgo a robust bounce by ditching stocks after they’ve already taken quite a dive. For instance, if you sold after that awful first week of September, you may have missed the more than 3% jump in the S&P 500 enjoyed over the past four sessions. Indeed, the punishment for panic can be quite severe. Missing out on just a handful of big up days could severely reduce your long-term returns.
That’s why investors should focus more on the longer-term growth prospects and the current state of the fundamentals than on a stock’s recent price action!
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) has suffered as investors rushed to the exits in recent weeks — likely fearing significant dilution following the announcement of interest in buying 7-Eleven’s parent company. Indeed, Couche-Tard has made big deals in the past, but none quite as large as 7-Eleven. It’s a big deal, perhaps too big for ATD shareholders to come to terms with.
Though Couche-Tard has raised considerable debt in the past to fund big deals before, some may be horrified over the debt load that could be raised to fund a 7-Eleven acquisition in this high-rate world. Undoubtedly, a potential $40 billion or more deal is quite hefty for a company with a market cap just north of $71 billion.
In a prior piece, I remarked that convenience stores tend to be major cash cows and that the added debt wouldn’t be as horrific as it seemed on the surface. That said, we just don’t know the final price of a 7 & i Holdings deal. Reportedly, 7-Eleven’s parent believes the initial $39 billion buyout offer undervalues the company. I’d be inclined to agree.
However, if Couche-Tard doesn’t get value, I’d argue that a deal may not be worth making. Considering the trajectory of 7 & I Holding stock (it’s been weak in recent years), perhaps Couche-Tard could walk away and return later, which could entail more willingness to take a deal for $39 billion or less.
Bottom line
For now, I think investors are jittery that Couche-Tard could pay even more to get a deal done. However, there would be less value for shareholders if Couche-Tard paid a markedly higher price; investors shouldn’t rush to conclusions by selling the stock.
We don’t even know if a deal will happen! And if 7 & i agrees to the terms, the regulators may not. All considered, the odds of a deal seem to be getting lower with time. With that, ATD stock should be recovering and not declining.
