I have to admit that I first studied the financial results of Couche-Tard (Toronto: ATD.B) in the late 1990s. For those of you who are already looking at the chart (I should have diverted your attention), remember that I have only been managing this portfolio since 2009. To my mind, the stock was too expensive at the time, and the company had too much debt and was too limited in its expansion (this was before its successful international growth). However, I always had admiration for Alain Bouchard, who is strongly committed to the shareholders and who resolutely followed his conviction that by adding small stores, his business could become a giant.
The retail business is becoming increasingly challenging because of online shopping, which considerably increases the competition. A clothing store, for example, is no longer competing only with other stores in the same city, but with online retailers as well. When I value a company that sells a product or service to consumers, one of my key criteria is to try to predict if online shopping can hurt its profit margin. In the case of Couche-Tard, the answer, in my opinion, is no. This company operates in a sector where proximity is key and where profit margins are low but predictable. In addition, its annual earnings growth of 31% over the past five years is impressive.
A small anecdote about Couche-Tard: When the appointment of Brian P. Hannasch as president and CEO was announced in September 2014, a journalist asked Alain Bouchard why his daughter hadn’t been appointed to succeed him as president. He simply answered that his daughter had just started working for the company. “We’ll see if she can manage a convenience store before managing a multinational,” he said. And why hadn’t another Quebecker been appointed? “Well, we had the best candidate, and nationality doesn’t matter much,” Alain Bouchard explained. This business leader deserves our greatest esteem!
This post has been excerpted from a June 2016 letter of the Robitaille Group at Desjardins Securities.
Disclaimer: The results shown are before management fees. This data reflects past performance and is not indicative of future returns. This document may contain statistical data cited from third-party sources believed to be reliable, but Desjardins Securities does not represent that any such third-party statistical information is accurate or complete, and it should not be relied upon as such. Alain Robitaille is registered as a portfolio manager with self-regulating organizations. He is authorized under IIROC Rule 1300 to make investment decisions and to give advice on securities for managed accounts. With the exception of Alain Robitaille, no member of Groupe Alain Robitaille may exercise discretionary authority with respect to a client’s account or approve discretionary orders for a managed account, or participate in the formulation of investment decisions made on behalf of or advice given with regard to a managed account. Each Desjardins Securities advisor named on the front page of this document, or at the beginning of any subsection hereof, hereby certifies that the recommendations and opinions expressed herein accurately reflect such advisor’s personal views about the company and securities that are the subject of this document and all other companies and securities mentioned in this document that are covered by such advisor. It is possible that Desjardins Securities has previously published other opinions, including ones contrary to those expressed herein. Such opinions reflect the different points of view, assumptions and analysis methods of the advisors who authored them. Desjardins Wealth Management Securities is a trade name used by Desjardins Securities Inc. Desjardins Securities Inc. is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF).