A number of factors related to broad pessimism among investors for any non-ESG option of late has driven the share prices of many high quality companies tied to sectors such as oil and gas significantly lower, of late. Alimentation Couche-Tard (TSX:ATD.B) is one such company I think has been caught in the crossfire. In this article, I will discuss why I think this stock still holds excellent value at this present time.
Couche-Tard’s exposure to oil and gas is very slim. In fact, the decline in the price of oil driven by the recent OPEC+ feud with Russia as well as the coronavirus pandemic has helped the company’s margins in the near term. As a purveyor of gas stations and retail convenient stores, Couche-Tard is at the end of the fuel supply chain and actually benefits from lower input prices which maintain or improve its margins. Margins on gasoline sales and the sale of goods at its convenient store locations have recently taken off and are the best I’ve ever seen.
This reality is both bullish in the short and long term, if you believe oil and gas will continue to be out of favour with investors over the long term, as I do. Additionally, Couche-Tard’s growth by acquisition model has continued to prove to be outstanding with various fundamental metrics such as return on invested capital (ROIC) much higher than many similar companies with similar business models. Couche-Tard’s management team is very patient and has discipline in deciding which companies to acquire, choosing to pass on overpriced opportunities it has bid on, against rivals.
Invest wisely, my friends.
