Dollarama Inc. (DOL-T)

Wouldn't buy now. Has benefited from the economic uncertainty, and so valuation has come up dramatically. North of 35x PE, so risk that could contract over the long term. Wonderful business, well positioned with price points to capture a larger portion of wallets in tough times. 

Last conference call referenced a small impact from sourcing from China, with the hit to margins yet to be seen.

Fantastic growth. Outperformed US peers. With tariffs, opportunity to expand margins, which would make a big difference to revenues. A top 10 holding for him. In a slowdown, consumers will be looking for bargains.

Still loves it. Paying 34x forward PE for 15% earnings growth. Dominant position. Cumulative effects of inflation driving more people to cost-conscious shopping. Recession resilient.

Still adding for new clients. Key has been that it has very little competition, unlike US counterparts. You pay up for that position, at 35x forward PE, but you get 15% earnings growth going forward. 

Beneficiary of cumulative effects of inflation and uncertainty in Canadian economy. Recession-resilient business model. Outpaced the TSX since its IPO in 2009.

So richly priced. Valuation is north of 30x PE because value proposition is so strong and consumers are pinched so hard.

Continues to like it. Paying a premium, but for specific reasons. Trades at 31x forward PE for 15% earnings growth. Recent decline is a good chance to add. In Canada, demand is growing for value-priced essentials.

Canadian stores, but worried about depreciating currency hard on the companies bottom line. Although company has done an amazing job opening stores - would wait to buy. Depends on currency risk. Would be a good long term hold of 5-10 years. 

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.