The Week That Was


Strong U.S. employment numbers coupled with what many considered to be an inadequate course of action by the ECB last week saw most market fall sharply. The markets hardest hit were Germany’s DAX (nearly 5%) and France’s CAC 40 (down more than 430 bps). North American indices closed the week surprisingly flat given news released this past week. Japan’s Nikkei 225 continues to lead on a YTD basis with a gain of 11.77%. With an upcoming FED rate rise later this month all but certain, we can expect some further profit taking in the near term.


Watching: Alimentation Couche-Tard

Quebec-based convenience store operator Alimentation Couche-Tard  (TSX: ATD.A, ATD.B) continues its consolidation drive with the recent acquisition of Irish convenience store and gas bar chain Topaz.

While I am generally not a fan of growth by acquisition, I must admit I am impressed with what Couche-Tard management has done while it consolidates what it says is an extremely fragmented industry (i.e. local convenience stores). The Company has managed to integrate most if not all of its acquisitions pretty smoothly and maintain financial discipline both in buying and controlling / paying down debt levels once deals are done.

Key to the Company’s strategy when acquiring convenience store networks is implementing best-in-class processes, improved controls, and a greater selection of private label and prepared food offerings…all of which tend to lead to both higher top and bottom lines.

Couche-Tard shares are currently changing hands at more than 30 times TTM earnings, a trailing yield of about 20bps, and have rallied about 30% YTD.

What do you think…do you like Couche-Tard for the (very) long-haul at these levels? I would rather wait for a pullback.