Investors who prefer low-volatility stocks tend to gravitate towards specific sectors and industries, including consumer staples. However, not all stocks within these categories have similar levels of stability and return potential, and they each have their individual strengths and weaknesses.
In consumer staples, for example, Alimentation Couche-Tard (TSX:ATD) stock can be considered a powerful pick for its return potential, even though its beta is not as low as others in the sector. However, at 0.95, it still indicates low volatility, and that’s just one of the many reasons to consider this stock. The most significant among them are:
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Business model
Alimentation Couche-Tard is a convenience store giant. It’s one of the largest chains in the world, mainly thanks to one of its three brands – Circle-K. The total number of sites under the company banner is massive (16,803). About a third of the sites are in Europe, and roughly 42% are in the US.
Its most significant revenue segments are merchandise, fuel, and food (both fresh and fast). Most of the things it sells are virtually immune to weak markets and economies, which is why its revenues/financials are stable. Another factor is that the bulk of its sites are in safe countries and regions.
The company is also expanding its reach and market penetration with strategic acquisitions, the most recent of which include buying all TotalEnergies sites in Germany and the Netherlands and forming a merger for the company’s sites (60% stake) in Belgium and Luxembourg.
Performance history
While the business model and its footprint are quite compelling, the primary reason most investors are interested in the stock is its amazing growth potential. ATD has grown by about 315% in the last 10 years and if you add the dividends, the total returns become 344%.
An even more impressive part of its performance is how it handles market crashes and other adverse events. ATD stock dipped over 28% in 2020 but bounced back in a matter of months instead of years. This swift recovery reflects its resilience.
Discount
One reason to buy the stock right now is its current bear market phase. The stock is already trading at a 13% discount, and the slump may grow if it continues to fall at this pace. The discount has also reached its valuation, which is currently at 19.4 and steadily inching towards an even fairer valuation.
Foolish takeaway
Alimentation Couche-Tard is a safe business with a massive global footprint that’s available at a discounted price. If there is a modest chance that the stock will continue to perform the same way in the near future, then it’s a must-buy. One practical reason to wait would be the current slump reaching its pinnacle.
