April 18, 2012 Comments

The big news today was that Alimentation Couche-Tard was making a huge acquisition of Statoil Fuel and Retail fuel / convenience stores in Scandanavia / Eastern Europe. Couche-Tard closed up $15.4% on this news. And this was on top of being up several percent in the past few days before this announcement.

It is more usual for the price of an acquiring company to decline rather than increase. In this case “the market” is pleased with the acquisition.

Our last update on Couche-Tard was December 11 and we rated it (lower) Strong Buy at $29.95. It closed today at $39.60. I have a high opinion of management.

I was not sure if I should sell my shares at this point or continue to ride along with the good track record here. I decided to sell. So I am not holding any now but made a very nice gain today. And I was up very close to 100% on these shares since I bought in July 2010.

Logically and mathematically, the price I paid for the share should not enter into my decision to sell. But like most investors I can’t help being influenced by the fact that I had a large gain. It made it easier to decide to sell.

I may well regret selling since Couche-Tard could very well continue to grow at a good rate for amny years. Buffett’s approach would likely be to hold.

I don’t have an updated rating on the company.

I am not completely impressed by the fact that the company focuses on the price as a multiple of EBITDAR, rather than price to earnings. However, they certainly have a very strong track record and so one has to give them some benefit of the doubt.

It’s rather astounding to think that yesterday we could have bought shares in this company for Norwegian 35 and yet today we are all excited because a company will buy it at 53. So excited that we drive the price of the buyer up 15%. If in fact Statoil Fuel and Retail is any kind of bargain at 53 then it must have been a screaming bargain yesterday at 35, but apparently few noticed. These kind of acquisitions suggest that many stocks are indeed quite cheap.

Meanwhile stocks were mostly down a bit today… Well., tomorrow is a new day and we shall see what excitement that brings, if any.