Dollarama Inc. (DOL.TO)

(A Top Pick July 4/16. Up 34.83%.) This is, bar none, one of the best retailers in North America. Exceptionally well run. Has a very high ROE. Their original runway in the opening up new stores was 1400, and currently are at about 1100. They have recently increased that to 1700.

All 3 of his top picks have an element of defensiveness to them. This company has had a massive run, but they still have a long runway for growth with another 600 stores that they would like to open in Canada. They’ve been recently testing their model with some Dollar Stores in Central America, where he thinks they will make their next move. Dividend yield of 0.36%. (Analysts’ price target is $140.)

Sold his holdings a little while ago. Long-term, this is a strong name, because there are not a lot of competitors in Canada that can come up against this company. In the near term, it is a bit expensive. Trading at 28X forward earnings. Has a good growth rate of 15%, so the PEG ratio is going to work out to about 1.6X.

(Market Call Minute) A real solid company and he would continue to hold it or wait for a pull back if you want to own it.

A very misunderstood stock. If you are an investor in Canadian equities, you have to consider owning this at some point. Because of its name, people think of it as a dollar store, but they have a lot of different price points.

More of a growth stock, and you are paying a lot for that growth. Trading at almost 50X earnings. In order for them to sustain their multiple, they have to continue to surprise on the upside. As a value investor, this really hasn’t shown up on his screen. At this valuation, it is not something he would look at.

He took profits recently. The valuations are a bit high for this space. A lot of the Canadian consumer staples stocks/retailers are expensive. This one is trading at about 28X forward earnings, with still a very good growth rate of 15%-17%. They had a very strong earnings report last quarter, which pushed the stock from the $110 level to $120, and it is now starting to plateau again. They are now accepting credit cards which is helping them. They have a long runway for expansion.

Sell this and wait for a better re-entry price? He would say no. He wouldn’t want to sell a high-quality company speculating that it is going to sell off. Nothing has really changed. It is a great company. It looks reasonably valued in his work.

This has been a phenomenal performer. It hit an all-time high today. On a technical basis, you have to love this. All momentum indicators are positive.

The stock is quite expensive, but he expects the growth to continue. They just came off the blockbuster quarter. The continuing growth is coming from 2 areas. 1.) The average transaction size is increasing. 2.) They are going to continue to open more stores. He would be cautious and take a half position, looking to leg in the rest whenever there is a small window of weakness. He doesn’t own this because the dividend is under 1%. Dividend yield of 0.36%.

A really good name. Had a great run. Earnings growth, revenue growth, potential to perform well in good and bad markets. Defensive, aggressive and it is a growth stock.

Going forward, it is expensive. About double the valuation of other dollar stores in the US, but worth it. They recently said they had the ability to add hundreds of new stores. They will also be introducing new concepts. It is run by one of the best management teams in Canada. He would buy it on a pull back because it is so expensive here.

Just reported some great numbers. Good earnings and good guidance going forward. A good name in terms of management and execution, and they have a lot of runway for expansion in Canada. Trading at 26X forward earnings, which makes him a little concerned. It has a 15% long-term growth rate, so it is still at a 1.5X PEG ratio, not extremely cheap. They are rolling out credit card acceptance nationwide for the 1^st time, which should be available by Q2 fiscal 2018 which should help sales. Feels the valuation is a bit stretched.

The leading dollar store in Canada. An absolute growth powerhouse since the IPO in 2009. Reported 4^th quarter earnings last week, and it was a massive beat relative to expectations. They increased their original target of growing to 1400 stores in Canada, to 1700 stores. At the current run rate, they are building 65-70 stores a year, and still seem to manage to generate very good 5%-6% comps in same-store sales growth, as a result of rolling out higher and higher price points. Great management and great execution. He would be very comfortable with this.

Chances of splitting? Just reported earnings and had very good numbers. They continue to exceed expectations, and as a result their share price is rewarded. Trading over $110, so it does beg the question whether or not they should split. If they split the shares, it makes it easier for retail investors to invest in it. However, you don’t really create any value when you split or consolidate shares.