Dollarama Inc. (DOL.TO)

It is an outstanding company with great management. It is on the expensive side at 30X earnings but if not buying, it is at least a good long term hold. There will not likely be a pullback.

Would recommend selling shares at this time. Strong business model, but company is over valued. Store growth in Canada has slowed - moving towards Mexico, which is risky. Buy on cheaper valuation. 

One way to judge management is to think about capital costs versus their return on invested capital. How are they allocating capital and making over and above that, because that translates into free cashflow. FCF in 2021 was $700M; at the end of January 2024, it was $1.2B. So FCF has gone up 60%, a very good sign. Allows them to open new stores, with each new store adding revenue.

He looks for ROICs of 15% or greater. In terms of ROIC, they're making 20% on their money with cost of capital at 8.5%. That's a difference of 12%, and a whole lot of free cashflow. Lets them be flexible, continue with their growth plan, and stock price is performing as it should be.

The chart has been in an uptrend since early 2022, but is weakening now. It just moved below its 50-day moving average. He's cautious about DOL, though it's been a super performer in recent years. There's been institutional selling in the past month or so. Expect more downside in the coming weeks, down to its 200-day moving average. Maybe buy in January and February on pullbacks.

It has recently come off with plans to expand in Calgary so there are cost headwinds to 2027. Valuation is quite high. It is expanding in other countries, eg. Latin America, so there is good growth ahead.
The question also included his cash position. They are fully invested but will probably take some profits in January.

Reported today. Met expectations on sales, EPS, and operating profit. Sales and earnings both grew ~6%, which puts it near the top of the pack given slowing economic growth. 

Market's not taking results in stride. Two new tidbits of information from the results. Extended longer-term outlook for store count in Canada, which acknowledges the maturity of the concept. Plans to open 1.6M square foot distribution centre in Calgary, which complicates the business model a bit. We've seen this before, he's comfortable owning.

Dramatic divergence between DOL and US peers. Hasn't figured out why. Analysts keep raising price targets, as they keep beating earnings. The trend is there. Trades at 35x forward PE, and he's a value investor. No big dividend. Subject to big market correction. Doesn't love the risk/reward.

We think DOL is a very high quality name and are quite comfortable with it for a long-term hold. We are comfortable buying at the current price, but a good entry price would be $140. DOL would be our top pick for exposure here, but another option with more of a growth tilt could be ATZ. 
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A star in Canada due to great execution and lack of competition. Shift to multiple price points is a winning strategy. Carved out a niche in Canada.

Has been a top pick in the past. Very strong growth potential in business. Lots of opportunity for store growth in Canada. Not as cheap as it was before, but strong company. Would wait for share price to fall before buying. 

Really likes it. Earnings forecast to grow 16-17%, 34-35x forward PE. Tremendous market share, no close second. If Canadian economy becomes soft, will get even more customers. Not sure how tariffs would or would not affect the name, but stock price movement over last couple of days indicates no impact. 

Costco trades at 50x PE vs. DOL's 35x, already high as its growth rate slows. DOL is looking overseas to Latin America to expand, which is interesting; there's lots of room to expand.

Excellent at the science of retail. Canadians pinched by inflation are increasingly changing their shopping patterns. Research shows you won't get things cheaper anywhere else in Canada. Very strong same-store sales, maintaining margins. Latin American joint venture has become a meaningful driver. Lots of blue sky ahead.

Brand-new high today. Still likes it. Not a lot of serious competition in this segment in Canada, so pricing power and ability to operate are that much stronger. 18% earnings growth, bit of a premium at 30x forward PE. A beneficiary as Canadians downshift spending.