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Stan WongAlimentation Couche-Tard (B)ATD.B.TOCOMMENTMar 09, 2017

A lot of the consumer staple names in Canada have become pricey because a lot of investors have merged over to those low volume defensive, high dividend type of names. Trading at about 17X earnings with a still pretty good growth rate. However, a lot of attention has moved away from those defensive names.

Stan Wong

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$61.64

Stock price when the opinion was issued

$49.67

As of Dec 07, 2021. Market Open.

food stores

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It is a growth by acquisition company and is disciplined about not over-paying. It ranks at an attractive level. The cost of fuel is a concern and where do they get their margins. Look elsewhere on an overall basis with consumer related stocks.

BUY

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EPS of 68c matched estimates; sales of $20.90B missed estimates of $21.21B. EBITDA of $1.64B beat estimates by 3%. Supply-chain optimization could let Couche-Tard maintain fuel profitability across its key markets for the rest of the fiscal year. US fuel margins declined sequentially (down 3.9%), but increased 2.5% compared with last year, an inflection point for the metric. If the company can keep this cadence of growth for 4Q, it's likely that US fuel margins may remain around mid-40 cents per gallon for the year. Canada might remain in the low-teen cents and high-single digits in Europe. Better control management allowed US inside-the-store margins to expand. As for M&A, recent acquisitions seem to remain on track, with the company reiterating its ambition for a friendly merger with Seven Eleven now that the possibility of a management buyout is gone. The stock is up, but this is likely more due to ongoing discussions with Seven Eleven rather than the quarter. But we are comfortable with the results.
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BUY

Very strong business - founder led & owned. Exception creator of wealth the past ~20 years. Has owned shares since 2014. Very good consolidator of convenience stores. High quality capital allocation skills. Recent 7-Eleven M&A is interesting, but depends on the final price that is settled on. Would recommend holding and/or buying.

PAST TOP PICK

(A Top Pick Apr 12/24, Up 8%)

Will continue to own. Great business with excellent capital allocation skills. Boring business that has a great chart. Very strong management team that gives investors ability to sleep at night. Expecting strength in this cycle.

PAST TOP PICK

(A Top Pick Feb 01/22, Up 12%)

Well-run and positioned to offer e-charging stations given all their stations and locations. Well-financed. Still has a little more upside.

TOP PICK

They report today. It's growing well-known abroad. They've performed well in the past 5 years. Free cash flow has grown 15% a year and the dividend 22% annually. The family owners gave up their voting rights, so the stock is friendlier to investors. If there is a recession, they have a growing private label group of brands to cushion the blow, since consumers will buy those instead of spending on pricey restaurants. Carrefour was a blip that didn't work. Otherwise, their M&A remains disciplined so they can make acquisitions going forward. (Analysts’ price target is $68.18)

PAST TOP PICK

(A Top Pick Dec 17/21, Up 19%) A fine business with many opportunities. Strong balance sheet. With weakening markets, more acquisitions lie ahead.

BUY

They sell non-discretionary items like the morning coffee and gasoline. The operate in Canada and abroad. They use their size to smartly price gas. Customers then spend in their gas stations things like candy bars which boast high margins. Really likes it and continues to buy it.

BUY

Has long liked this, as it has been compounding and making money for shareholders for decade. They just sorted an issue with the competition bureau over a mid-sized acquisition. See what the quarter reports after today's bell. A fine operator. They use gasoline selling to sell high-margin items like candy and hot dogs. Great operators and buyers in the fragmented convenience store industry. Have spread even to Hong Kong. They have firepower that they will spend to keep building. Likes it.

BUY

SLF vs. ATD'B ATD is doing very well because oil prices are high. Also, they are on the verge of buying a company. Both add to upside. SLF is the best Canadian insurer, with stable, but slow earnings growth. It will benefit from higher interest rates. Buy and put away and own for the dividend. Shares are down 5-10% from last year's high, so good to enter now.

TOP PICK

There's a lot of growth potential with international exposure across North America and Europe. Post-Covid, traffic to their stores will pick up. ATD will be competitive among EV charging stations. (Analysts’ price target is $56.93)

BUY ON WEAKNESS

It is a forward looking company with very good management. Has owned for a long time. A defensive play. Buy on softness.

DON'T BUY

He hasn't owned this due to ESG reasons as 40% of sales were from tobacco. They might need to expand their network to make them more EV friendly. Hard to see what the long term future is in this sector.

STRONG BUY

Sunset clause on voting share structure has been triggered, so there's only one class of shares. He'd recommend it very strongly. Benefits from the expanding economy we hope to have over the next few years.

BUY ON WEAKNESS

Well run. Collapsing of dual class structure is a positive. Tremendous growth opportunities internationally. Getting pricey here, try around $47-48. Reasonable valuation. Ability to grow by acquisition is getting tougher. Huge free cashflow. Aggressive share buybacks, expect dividend increases. Strong balance sheet. Earned the right to be respected for a growth by acquisition story.

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Stan WongAlimentation Couche-Tard (B)ATD.B.TOCOMMENTMar 09, 2017

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