Investing in the stock market can be very rewarding. If you’d put $10,000 into an S&P 500 Index fund 30 years ago and held to today, you’d be sitting on $177,000! These kinds of results are possible investing just modest sums of money in low risk investments.
With individual stocks, the game is much riskier. It’s possible to lose money on an individual stock no matter how long a period of time you hold it for. Sometimes, companies go bankrupt and get delisted. Other times, they limp along as shrinking enterprises, delivering negative returns. In order to make money in individual stocks, you need to know what you’re doing.
Figuring out which stocks are worth holding for the long term is very challenging. Fortunately, you don’t have to figure it out for yourself. You can get an inkling as to which stocks are good by looking at what corporate insiders and top fund managers are holding. In this article, I will explore three of Canada’s “best kept secret” stocks for maximum profits, as judged by top investors around the world.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is a Canadian gas station company owned primarily by Alain Bouchard’s family. Bouchard is one of the most successful entrepreneurs in Canada, his continued ownership of Alimentation Couche-Tard is a major vote of confidence in the company.
Most investors aren’t aware of Alimentation Couche-Tard. It’s pretty well known in Quebec, but not elsewhere. That’s a shame because the company has delivered some of the best returns in Canadian equities over the last decade, a period in which it has risen 534%.
What’s ATD’s secret sauce?
A big part of it is that the company has grown primarily by re-investing earnings rather than borrowing money. Over the last decade, ATD has increased its number of stores by thousands, yet it still has a mere 0.47 debt-to-equity ratio. By prudently re-investing earnings, ATD has been able to achieve growth cheaply. Not every company can pull that off.
Canadian Pacific
The Canadian Pacific Kansas City Railway (TSX:CP) is a Canadian railroad company operating in both Canada and the United States. It has grown rapidly over the last decade, having grown its revenue by 4.7%, earnings by 20% and free cash flow by 39% – all of these figures on a compounded annual (CAGR) basis. Part of the reason why CP railway has grown so much is the fact that it has invested in expansion. The company bought out Kansas City railway just last year. It paid a steep price for the acquisition, but it did gain a new revenue stream that boosted its earnings.
CN Railway
The Canadian National Railway (TSX:CNR) is another Canadian railroad company. Like CP Rail, it has outperformed the market over the last decade and delivered great returns to shareholders. Even though CNR is a blue chip stock, it isn’t that well known compared to Canada’s big banks and telcos.
Many smart people own CN Rail stock. The largest shareholder is The Gates Family’s Cascade Investments, which is managed by Michael Larson. Over the last decade, CNR has grown its earnings by about 11% per year. This year, the growth is even faster – earnings per share grew at 38% last quarter. Thanks to its strong competitive position (CP is its only major competitor), CNR has a lot of pricing power. This helps ensure good results over long periods of time.
