For the truly long-term investors out there who wish they could hang onto a stock forever, it’s worthwhile to think about the types of names one can pass on to one’s children.
Undoubtedly, a “forever” holding period may be less practical, especially if an emergency expense arises such that one will need to eventually take some profits off the table. Still, this kind of long-term thinking, I believe, can really take advantage of the power of compounding over the course of decades. In this piece, we’ll check in with one Canadian stock that I think is a great hold for life.
Of course, things can change over the course of many decades, and investors shouldn’t be too attached to a stock. That said, for the firms with management teams that can adapt and leverage new technologies while ensuring a wide economic moat over time, I think such stocks are worth considering passing down to future generations.
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Couche-Tard: A great stock to pass down to future generations?
When it comes to truly long-term holdings, I view names such as Alimentation Couche-Tard (TSX:ATD) as worth hanging onto for 50 years or more. Indeed, Couche-Tard is a convenience retailer that used to wheel and deal consistently. More recently, however, the firm has set its sights on larger, pricier, more ambitious targets, but with limited success. Of course, the CST Brands deal was an elephant that has worked out. That said, the pursuit of 7-Eleven parent, 7 & i Holdings, and French grocer Carrefour didn’t result in anything.
Either way, I have confidence that the strong managers, trained by its legendary founder Alain Bouchard, have what it takes to feed the growth-by-acquisition story for many, many decades to come. Indeed, there’s still a ton of room in the global convenience store scene to acquire one’s way to greater earnings growth. And while there’s a growth runway in North America, I view the European and Asian markets as areas that could provide even greater synergies, especially as electric vehicle rollouts change the way convenience stores do business.
In prior pieces, I’ve mentioned that a wider selection of ready-to-eat and grocery consumables was key to thriving in the electric age. Combined with the rise of artificial intelligence (AI), I think frictionless checkout (and maybe even drone delivery) might also play a bigger role in Couche-Tard’s distant future.
AI and the future of convenience retail
Of course, if one plans to pass shares of a business down to the next generation, it’s worth thinking multiple decades down the road. With the rise of robotics, perhaps Couche-Tard might be in for some significant margin gains over the long haul, especially if the firm can buy a grocery store chain and implement various next-generation robotics technologies to drive operating efficiencies.
Sure, robotics in the store or warehouse may sound a tad far-fetched today, even as this ongoing AI revolution heats up further. However, all you have to do is look inside an Amazon warehouse to see the kind of profound automation that’s already hard at work behind the scenes.
Indeed, AI self-checkout systems and demand-forecasting systems could be a massive driver of margin growth over the next 15 years. And while the mix of products at the local Circle K is bound to change in the coming decades, the durable competitive advantage of a firm like Couche-Tard, I think, will remain, if not strengthen.
