One Stock I Can't Wait To Buy On Sale
By Brian Stoffel | June 13, 2017 |

The bull market we are experiencing has gone beyond just about anyone's wildest predictions. Since the nadir of the Nasdaq in March 2009, it has almost quintupled -- and that's not including dividends!

While that's great news for folks invested along the way, it puts those with new money in an odd position: buy now near market highs, or wait until an inevitable dip?

We here at The Motley Fool are distinctly not in the group that calls for trying to time the market. At the same time, we realize the utility of a healthy watch list of stock candidates to buy in a market swoon. Below, three of our analysts talk about why they're ready to snatch up shares of Wal-Mart (NYSE: WMT), Canadian National Railways (NYSE: CNI), and Shopify (NYSE: SHOP)... once prices fall.

I Could Be In For A Long Wait For This One To Go On Sale Again
Tyler Crowe (Canadian National Railway): I have a pretty long wish list of companies I want to own, but I just can't quite get over the hurdle of paying a high premium. The idea is that when we have the next epic market pullback -- despite what this bull market makes us believe, they still happen -- I will buy a bundle of these businesses with incredible economic moats at much better prices than what I can buy them for today. One company that hovers at the top of this list is Canadian National Railway.

Canadian National Railway is the quintessential high economic moat business. Rail is a transport method that can move goods at almost orders of magnitude less cost than truck or air freight; the barriers to entry for new players are almost insurmountable; economies of scale give immense benefits to the big fish; and companies that do own particular rail lines have near monopolistic control. It's incredibly hard envisioning a world 20, 30, or even 50 years from now where rail isn't playing a pivotal role in transportation. 

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Canadian National Rail takes those competitive advantages and amplifies them as the only railroad company in North America with lines connecting the Atlantic, Pacific, and U.S. Gulf Coasts, and is the most efficient operator in the business. Considering all these things, it's no wonder that shares of Canadian National trade at a pretty lofty enterprise value to EBITDA ratio of 13. 

The one thing to know about rail stocks, though, is that they very much track economic growth. When the economy hits a rough patch, shares of railroad stocks tend to get hit pretty hard. When that happens, I think there is a decent chance I will be able to pick up shares of Canadian National Rail at a much better price than what I would pay today. 

Still Waiting For This E-commerce Star To Stumble
Brian Stoffel (Shopify): Perhaps I'm a glutton for punishment. Just three months ago, I called out Shopify -- a company providing a software as a service (SaaS) platform for companies to build an e-commerce presence -- as a stock I was waiting to buy on sale.

The sale never arrived. Shares are up 61% over that short time frame. Obviously, buying back then would have been better than waiting. So why I am taking the same approach? There are two reasons: first, the company already occupies over 3.5% of my real-life holdings. Second, I know that the market's strongest growers over the long run often suffer harrowing falls.

The company itself is absolutely on fire. Because switching costs are so high for any small or medium-sized business once it signs onto Shopify's platform, each additional customer's revenue is very stable. Throw in add-on services and there are multiple levers that can help Shopify continue to grow sales in the decade to come.

Shopify's first quarter results are a big reason shares have advanced so much. Revenue jumped 75%, buoyed by add-on merchant services. Gross margins expanded by 270 basis points. And gross merchandise value -- a measure of how much people are selling via the company's platform -- advanced over 80%.

Now, if the market could just cut me a little slack, I could make it an even stronger driver of returns moving forward.

A Retail Giant That's Fighting Back
Tim Green (Wal-Mart Stores): It can be difficult to imagine a world where Amazon.com isn't the undisputed king of online retail, given how dominant it is today. But Wal-Mart, the Amazon of its day in some ways, is aiming to disrupt the disrupter. The company is shaking things up, offering free two-day shipping on orders over $35 and offering discounts on certain online orders picked up in-store. Wal-Mart is even testing paying its store employees to drop off packages on their way home from work, all in an effort to slash shipping costs.

These initiatives are paying off. Wal-Mart's e-commerce sales grew by 63% year over year during the first quarter, more than double its rate of growth during the previous quarter. At the same time, the company's stores are performing well. U.S. comparable sales rose 1.4% during the first quarter, with traffic rising by 1.5%. Wal-Mart even managed to grow per-share earnings, a sign that heavy investments in higher wages and e-commerce were the right call.

I think Wal-Mart is doing exactly what it needs to do to compete in a world where retail sales are increasingly shifting online. The market seems to agree, pushing shares of Wal-Mart up 13% over the past year. Wal-Mart stock isn't all that expensive, trading for about 18 times 2016 earnings. But I plan on waiting for a lower price, given that a price war with Amazon won't be cheap.

As you can see below, Brian already owns shares of Shopify, but Tim and Tyler can't wait to get their hands on Wal-Mart and Canadian National shares, respectively. All three would be good to put on your own watch list for the next market swoon.

This article originally appeared on The Motley Fool and was written by Brian Stoffel, Tyler Crowe, and Timothy Green.

 

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