Today, we look at a stock that has made tremendous gains for us and our subscribers and continues to earn our recommendation as one of the best investments in Canada today. Convenience store operator Alimentation Couche-Tard is one of the rare Canadian stocks that has expanded successfully into the United States. And beyond: its purchase of Norway’s Statoil Fuel and Retail outlets has generated steady revenue for the company. Couche-Tard’s history of choosing and integrating beneficial acquisitions has made it a consistently rewarding growth stock. Since we made it our Aggressive Stock of the Year for Stock Pickers Digest in 2012, it is up 495.3%.
For a profile of another growth stock we recommend that has made a good use of acquisitions, read Grocery giant Metro knows how to shop for acquisitions. To discover a number of key guidelines on how to identify the best growth stocks, read What are growth stocks?
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ALIMENTATION COUCHE-TARD (Toronto symbol ATD.B; www.couchetard. com) operates 6,314 convenience stores throughout North America. Canadian outlets operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand.
In Europe, Couche-Tard operates 2,233 stores across Scandinavia, Poland, the Baltic States (Estonia, Latvia and Lithuania) and Russia. These stores were acquired when it bought Norway’s Statoil Fuel & Retail ASA for $2.7 billion in June 2012.
Recently, Couche-Tard sold part of its Statoil business to Fuchs Petrolub SE for an undisclosed amount. Statoil Fuel & Retail Lubricants is a leading supplier of industrial lubricants in Scandinavia and the Baltic states. Germany-based Fuchs Petrolub develops, produces and distributes around 10,000 lubricants and related products around the world.
The sale will let Couche-Tard focus on its core business of operating convenience stores and selling fuel in Europe and North America.
In March 2015, the company completed its $1.7-billion acquisition of The Pantry (symbol PTRY on Nasdaq), which operates more than 1,500 convenience stores in 13 southern U.S. states.
Founded in 1967, The Pantry mainly grew through acquisitions beginning in the late 1980s. Like Couche-Tard, it focuses on selling higher-margin fresh food. It sells its own private-label bottled water and is the fifth-largest location for Subway restaurants.
Couche-Tard paid $1.7 billion—$ 860 million in cash and the assumption of $840 million of debt. This is its biggest purchase since its Statoil acquisition in 2012.
Also, on March 17, 2015, Couche-Tard agreed to buy Royal Dutch Shell’s retail, commercial fuels and aviation businesses in Denmark for a reported $300 million. The deal includes 315 service stations, comprised of 225 full-service stations, 75 automated fuel stations and 15 truck stops. More recently, the company bought 279 Esso outlets owned by Imperial Oil. It is now among those looking at bidding for CST Brands, the large chain of convenience stores operating in Eastern Canada and the Southwestern U.S.
Growth by acquisition can be risky, especially with deals this big. But Couche-Tard has a long record of successfully integrating acquisitions.
Growth stocks: Couche-Tard continues to achieve all-time highs
Alimentation Couche-Tard is at new all-time highs after reporting improved profits in the latest quarter.
In the three months ended July 19, 2015, Couche-Tard’s sales fell 2.2%, to $8.98 billion from $9.19 billion a year earlier (all figures except share price and market cap in U.S. dollars).
The fall came from lower gasoline prices, while the higher U.S. dollar cut the contribution from its European operations. That was partly offset by a full quarter of sales from The Pantry.
Earnings per share rose 10.4%, to $0.53 from $0.48, thanks in part to higher profit margins on merchandise and fuel.
The company pays a dividend of $0.22, which yields 0.33% and appears to be safe.
Couche-Tard was our #1 buy for 2012. It has risen over 495.3% for us since then, but we think it has more gains ahead.
Recommendation in Stock Pickers Digest: BUY