Is Couche Tard a Buy Right Now?

Just another promising Monday market start that soon fizzled out. Futures were up significantly in the morning but the Dow and TSX managed to puke it all up by day's end.

Of course this is only bad news if you index your portfolio. Fortunately I don't. I would further suggest as Buffett does to buy quality companies, hold for the long term and ignore the stock market.

I bought Couche Tard (ATD.B) (speaking of quality) last week for the second time in my trading history and is one of those stocks I never should have sold. It is a high quality Canadian growth story and a major player in the convenience store/gas station space.

Just go hang around the outside of one on a Saturday or Sunday and check out the foot traffic and people pumping gas. The Globe and Mail recently published a story on how it should be a buy on most growth oriented investors watchlist. I have purchased it for my Gambling Portfolio. Here are some of the numbers;

Beta: 0.61

ROE: 24%

Forward P/E: 16.2

EPS Growth: 25%, $66.22 per share

Revenue: $56.3B, per share =99.70

Debt: $8.6Bl
Forward Dividend: 0.61%
Payout Ratio 10%

Price Paid: $65.85

52 week high: $67.96

Couche Tard is a growth by acquisition story. That's how they get big and make money eventually. Outside of Quebec they are known and branded as 'Circle K'.

In their latest earnings report they made $3.5B selling merchandise and gas. That was an increase of 27.6% over the previous year. They use this to pay debt and hunt for more bargains. 

Why I Like It

It operates 12,740 convenience stores that generates $1B a yer in free cash flow. It then allocates that cash by buying more companies and re-branding them. They are diversified around the Globe in North America, Scandinavia, the Baltics, Russia, China, Ireland, Saudi Arabia, Costa Rica, UAE, Mexico, Malaysia and Viet Nam. 

Is It Risky?

Has traded in a range of $52-$68 during the past 52 weeks so there are times when it has experienced a significant drop. With a beta of below 1 it is a medium risk story. Stock has traded mostly sideways for the past 3 years and analysts are forecasting a breakout over $68 in the next 6-12 months. We'll see, so I'm holding.

In Sum

This is a low yield high growth stock. I plan on holding through the next earnings quarter and see if the company can breakout to the upside. I also do believe this stock is highly suitable in your retirement account to just set it and forget it.

If you have smokers in your family they are always going to the store. Our local Couche Tard gas station offers the cheapest gas in the area so lines are long and people usually are tempted to buy something else while at the counter waiting.

This company has already provided investors with above average returns and to me still looks cheap with a low p/e of 16 and predicted to grow earnings by 15% for the next 3 years. Sounds like a good place for an investor to park some money.

I NEVER USE MY RETIREMENT MONEY TO TRADE IN AND OUT OF STOCKS. I VERY SELDOM SELL THEM UNLESS MANAGEMENT GETS STUPID!

Looking for Saving Ideas so You Can Invest? 

If you are looking at ways to save money this new book The Cashflow Cookbook can help you find some savings to then use to invest.

If you are having trouble getting your financial house in order and organized then you need to read Worry Free Money. 

If you are further looking for portfolio ideas then you might find my review of The 6-Pack Portfolio a way for you to get started on your investing journey. All of our retirement money is invested in this manner. We just hold more than 6 positions.

If you want to read more about the theory and methodology of some of Canada's professional investment/portfolio managers then you need to pick up a copy of the book 'Market Masters'. Robin Speziale conducts interviews with these top money mangers using a set of pre-arranged questions. This will give you a real insight into how others invest money and how they think. A must read!

Would you buy Couche Tard or do you own it?