For long-term investors seeking a truly unique buy-and-hold opportunity right now, there are thousands of options to choose from. Most of the best companies have been picked over, to be sure, and any investor holding some passive exchange-traded fund (ETF) exposure will likely already be invested in these names.
That said, companies like Alimentation-Couche Card (TSX:ATD) are the sorts of opportunities I’m exploring most aggressively right now. These companies trade at reasonable multiples, have defensive business models and solid balance sheets, and are emboldened with strong growth prospects over the long term.
Here’s why I think that despite Couche-Tard’s impressive increase (see above) over the past five years, its most recent dip does present a compelling buying opportunity right now.
Source: Getty Images
Defensiveness matters
Operating a range of gas stations and convenience stores under very recognizable banners for North American and European consumers, Alimentation Couche-Tard is the sort of company that many individuals may have come in contact with but aren’t aware of.
Couche-Tard is thus a company I view as a sneaky defensive play in a market that’s overlooked such stocks for quite a while. The fact that the company is an under-recognized leader in these boring sectors should bode well for value investors who are able to accumulate shares at a discount and hold them for a very long time. As the chart above shows, that’s broadly been the case.
Now, while growth has slowed somewhat, and investors have largely shown indifference to this stock as a buying opportunity of late as a result, I think this could be a unique buying opportunity. As the company continues to grow organically via same-store sales and foot traffic growth while acquiring new locations and growing via mergers and acquisitions, there’s plenty of upside ahead on the horizon.
More acquisitions needed
That said, this key driver of Couche-Tard’s long-term growth (acquisitions) has slowed down considerably of late. Part of this has to do with the reality that Couche-Tard is no small company anymore. With a market capitalization that’s eclipsed the $65 billion threshold, it may be hard for some investors to categorize this company as a value stock.
However, I’d argue that with a forward price-earnings multiple of 16 times and a 1.1% dividend yield complementing the company’s growth prospects, Couche-Tard is a company that could easily produce double-digit annual returns for decades to come.
That is, if the company can get back to its impressive revenue and earnings growth trajectories we saw in the past. I think such a scenario is likely, and that’s why Couche-Tard remains a top pick of mine right now.
