Buy Very Low and Sell Very High
During my decades of experience advising investors and writing about stocks, I have learned many lessons. Sometimes, though, my role in the investment world is misunderstood. My goal is to find stocks that will rise in the next 24 months with almost 100% certainty.
The best way to make money in the stock market is to invest in conservative stocks for long-term holding. No market timing, no charts—just buy blue-chip companies at low prices and wait patiently until the stock price becomes overvalued. My intent is simple: take advantage of the natural ebb and flow of the stock market, and beat the stock market indexes by a wide margin.
Hope You Didn’t Miss This
In my November 22, 2012 Cabot Wealth Advisory, I offered two companies that were selling at very reasonable prices and were paying solid dividends. My recommendations, Ingles Markets (IMKTA) and Kroger (KR), operate grocery stores in the U.S. The grocery store business certainly isn’t glamorous and companies tend to shuffle along at a snail’s pace. But both companies’ stock prices were selling at unusually low valuations. In addition, management at Ingles and Kroger had introduced new business plans that promised to boost sales and profits substantially higher during the next several years.
The recommendations paid off handsomely for Cabot Wealth Advisory readers. If you followed my advice back in November, you’re now sitting on profits of 65% for Ingles and 52% for Kroger, compared to an increase of only 19% for the Standard & Poor’s 500 Index.
I write the Cabot Benjamin Graham Value Investor and the secret to my success is finding high-quality stocks at bargain prices. I do this by screening … just as Ben Graham prescribed. One of my key ingredients to success is to find companies selling at bargain prices. Ingles and Kroger, for example were selling at 8.2 and 9.8 times estimated earnings per share respectively for the next 12-month period. Both companies’ earnings had grown at a steady pace during the past decade, and they provided dividend yields of 4.1% and 2.4% respectively. After gaining more than 50% each since November, Ingles and Kroger are nearing their Minimum Sell Prices. I will be sending out Sell Alerts to my subscribers soon after Min Sell Prices are achieved.
Ingles and Kroger are not my only successes by a long shot. Model stocks recommended in my Cabot Benjamin Graham Value Investor have easily beaten the S&P 500 Index during the past 3-month, 6-month, 1-year, 2-year, 5-year, and 10-year periods. That’s significantly better than most mutual funds, investment letters and even hedge funds!
These stocks have more than DOUBLED since my initial recommendations:
These are good examples of what Cabot Benjamin Graham Value Investor is all about: You buy at the suggested Buy Price, and hold patiently until you sell at the suggested Sell Price. No, the system doesn’t work perfectly every time, but the results over the past several months and years indicate that this is the most profitable system with the least amount of risk anywhere.
In keeping with my theme of buying low and selling high, I am recommending Alimentation Couche-Tard now. Couche-Tard, a Canadian company, has an astute management team and is expanding rapidly through acquisitions. The company’s shares trade only on the Toronto Stock Exchange.
Alimentation Couche-Tard ‘B’ (ATD.B) is Based in Laval, Quebec, and operates a chain of convenience stores, specializing in the sale of quick purchase convenience items, gas and fast-food.
Alimentation Couche-Tard operates 12,500 stores throughout much of the world under the Circle K, Couche-Tard, Mac’s, and Statoil brand names. A majority of the stores are company-owned, and most sell gasoline. Couche-Tard differs from other convenience store operators, in that the company is worldwide, and the company is viewed in many parts of the world as a seller of transportation fuel with a minor convenience store business on site rather than a convenience store with gas pumps on site.
Couche-Tard’s huge appetite for gasoline places the company in position to negotiate favorable prices when buying fuel from major oil companies such as ExxonMobil and Statoil. In addition to its gasoline and convenience store businesses, Couche also offers marine fuel, aviation fuel, lubricants and chemicals. In addition, the company operates key fuel terminals and fuel depots in eight countries.
In 2012, Alimentation Couche-Tard purchased the Statoil retail arm of Norwegian oil giant Statoil ASA for U.S. $3.6 billion. The purchase included a broad retail network across Scandinavia, Poland, the Baltics and Russia with 2,292 stores. Couche expects to greatly expand convenience items at the Statoil stores which will likely add substantial sales and earnings during the next several years.
Sales soared 55% and EPS (earnings per share) increased 23% during the 12 months ended 4/28/13. Acquisitions, in addition to the Statoil purchase, pushed sales and earnings higher. I expect sales and EPS to increase 18 to 20% during the next 12-month period ending 4/29/14. Favorable results from the Statoil purchase could boost results much higher.
Considering the rapid growth and future potential of Alimentation Couche-Tard, ATD.B shares are a bargain at 17.0 times my forward EPS estimate of 3.65. The company’s balance sheet is very strong, and the dividend, which currently yields 0.5%, will likely be increased considerably during the next 12 months.
I will continue to follow Alimentation Couche-Tard, as well as many other high-quality companies in my Cabot Benjamin Graham Value Investor. My next issue, coming soon, will focus on undervalued A-List Dividend stocks. I hope you won’t miss it!
Editor of Cabot Benjamin Graham Value Investor
Editor's Note: You can find additional stocks selling at bargain prices in our new and improved Cabot Benjamin Graham Value Investor. In every issue, you’ll find Roy’s legendary Maximum Buy and Minimum Sell Prices for over 250 well-known stocks. Just buy at the Max Buy Price and sell at the Min Sell Price—it’s that easy.