Q: I own Wallmart Costco and Dollarama in the Consumer defensive sector. They each comprise about 2% of my portfolio holdings for a total of 6%. Would it make sense to just own the big two compounders Wallmart and Costco and sell Dollarama?
5i Research Answer:
Both WMT and COST are exceptional long-term compounders, but we would actually keep Dollarama in the mix. DOL gives Canadian-specific exposure, tends to hold up extremely well in uncertain consumer environments, and has a stronger growth runway on a relative basis than either of the US names at current valuations. We feel the diversification across price points and geographies is a feature, not a flaw. While we cannot personalize responses, we would be comfortable holding all three.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in COST, WMT.