Investment Q&A

Though the company is classified as consumer discretionary/cyclical, the vast majority of MUSA’s earnings are driven by sales from nicotine products and merchandise, which are quite predictable and resilient. The company’s share price has not performed well recently, largely due to weak same-store sales growth in recent quarters and partly because defensive stocks have fallen out of favour in the current market. In particular, defensive names with uncertain prospects tend to be punished more heavily than usual. Over the long term, we think MUSA will do just fine, given that management continues to open new stores consistently and repurchase shares. Investors may simply need patience for management to execute and reignite same-store sales growth.

We think CASY and ATD are also solid names within this space that investors can keep on their watchlists. In terms of entry points, we find ATD and MUSA attractive at current levels, while CASY could be interesting if the share price drops below $520.