Alimentation Couche-Tard (ATD.TO)

Poised to take a giant, bold leap forward with proposed friendly acquisition of 7-Eleven, the largest convenience store in the world by # of outlets. Biggest by market value is actually ATD itself. Acquisition is a big "if", would be synergistic. Shrew operators, extremely capable serial acquirers in a fragmented industry.

Fingers crossed for success in Japan. They won't do a deal unless it creates shareholder value. So if a deal is successful, you can bet dollars to doughnuts it will be priced well, strategic, synergistic, and will be reflected in a higher share price in due course.

They have a good track record of buying an integrating gas stations. The 7/11 deal is complex. 7/11's parent company is worth US$38 billion vs. ATD's C$75 billion. This could take years, and the Japanese parent has to review the deal and settle on a price (nobody knows), then there's regulatory approval in the U.S. ATD's net debt-to-EBITDA is 2.2x which is in their target range, so ATD will have to issue equity. She wouldn't buy this, based on this deal.

Amazingly well run. Talented founder is still there; probably won't see anything negative until he leaves. Cigarette consumption continues to drop worldwide, gasoline consumption will probably follow. So you have to rely on snacks and acquisitions for revenue growth. 

Still opportunities, no reason to sell.

Absolutely wonderful. Well run. Very opportunistic on capital allocation. Circle K stores are popping up everywhere. Today's valuation of 18-18.5x earnings puts it above his buy price; he'd prefer a multiple point lower. Don't chase.

Very difficult to make money in this space, but they have a formula that works and is difficult to replicate. As they get bigger, they have scale and pricing power, which improves profitability.

He's owned this in the past. It has done well. It comes down to consumer spending. He likes their long-term fundamentals. Also look at Parkland.

The founder built an empire from a corner store. It is well managed and has made good acquisitions. It is a good company to have for the long term.

Great growth story. Seems a mediocre business, but has done a spectacular job making acquisitions and cutting costs.

Global leader, geographically well diversified. Most revenue comes from fuel. Soft earnings this quarter, due to gas margins and reduced same-store sales; Canada was more impacted than Europe or US. 

As inflation comes down, rates will come down, and consumer spending should pick up. So he expects higher earnings going forward. Strong balance sheet ready to go with more M&A. Buy here, hold long term.

(A Top Pick Jun 23/23, Up 25%)

Excellent business with very strong margins. Will continue to own shares. Has owned for 20 years. Very strong management team that is excellent at capital allocation. Recent M&A trends very strong - ability to execute well on this aspect. 

Correction since March. Now in a holding pattern between $74 and $82, consolidating, digesting previous gains. Would be a concern if it took out $74 support.

Correct. About 40% of gross profits comes from fuel. Putting a big push on its merchandise. Was trading below its historical average (17.5 PE) a few years ago, took off, and then became a momentum stock. Trading around 27x PE, overpriced. Hybrids, not EVs, are the threat.

Still, seems to be doing all right in European countries where there are lots of EVs.

A better choice than PKI.

Flies under the radar for many investors. Started in 1982 with 1 convenience store in Laval. Now 14-15K stores across the world. Excellent operations in Canada, US, Europe, Asia. Industry still quite fragmented, so still long runway for acquisitions. Marries operational excellence with capital allocation. Yield is 0.9%.

It has come off. Although not a fast growing company, its price ran up this past fall/winter. Its valuation is typically 17 to 17 1/2 times earnings but it is now in the mid 20's. Be cautious - don't buy now in case the valuation goes back to its average.

Leader in its space, incredibly well run. Add here. Rare example of a Canadian retailer doing well in the US. Tends to be soft when economy slows. Phenomenal long-term investment. Spectacular acquirers. Incredible value-creator.