Advertisement

I Bought More of This 1 Top TSX Reopening Stock

Watch for the Warning Signs Stock Market Prices Trends 3d Illustration

There are plenty of top TSX reopening stocks out there. It’s these names and not the tech darlings of 2020 that could lead the upward charge into year’s end. Enter Restaurant Brands International (TSX:QSR)(NYSE:QSR), a Canadian fast-food behemoth I recently purchased more shares of amid recent weakness.

The company recently served up a solid quarter, yet, like so many other firms that crushed estimates can’t seem to sustain a rally. Has the stock market hit a peak such that not even blowout results can move the needle? Who knows? Regardless, I think investors should feel enticed to load up on shares of firms, like Restaurant Brands, whose stocks aren’t much higher than they were before posting impressive quarterly results. In essence, investors get a glimpse of the company’s hand without having to pay up for doing so.

Mr. Market doesn’t seem to be rewarding earnings beats anymore

Mr. Market is reluctant to reward top-notch quarter results this spring. The stock market may be a tad frothy, but I still believe that he’s making a big mistake, especially with a reopening play like Restaurant Brands, which, I thought should have surged above $90 upon the release of its incredible numbers, which was robust in spite of continued COVID-19 lockdown pressures.

With the great economic reopening up ahead, I don’t think Restaurant Brands stock is going to stay depressed for very long. The markets can go ahead and be irrational over the near term. But at the end of the day, it’s the earnings results (and guidance) that will dictate the trajectory of a stock. And for Restaurant Brands, the runway looks clear for take-off as we make a move into the post-pandemic environment, which could be in the cards as soon as early 2022.

Apple, Restaurant Brands and many other market darlings blew away earnings results in the first quarter, yet Mr. Market doesn’t seem to care. In due time, he will care, but in the meantime, I think it’s wise to punch your ticket before the market deems that earnings matter again. Whether that’s before or after a market correction is anybody’s guess. But regardless, you should buy the stocks you deem to be priced below your estimate of its intrinsic value.

Bouncing back from the coronavirus crisis

It was a solid quarter for Restaurant Brands given the dire circumstances. Even though the post-earnings action in the stock would suggest otherwise. Popeyes Louisiana Kitchen, whose chicken sandwiches are still hot sellers, gave lift to the overall results. Burger King held up reasonably well amid lockdowns with flat comps, while Tim Hortons continued to drag its feet, with comps down around 14%.

While Popeyes isn’t nearly as influential to revenues as the other two brands, I think it’s a mistake to discount the chicken chain’s incredible success. People are more likely to shoot QSR down because of the abysmal results at Tim Hortons, which has lost a tonne of business from COVID-19’s impact. I think it’s a mistake to discount a turnaround brewing at the beloved Canadian chain or think that the success will be isolated at Popeyes. If management can innovate at Popeyes, they can at its other two brands too.

With modernization efforts ongoing, Restaurant Brands is poised to become a leader in the fast-food tech scene. The company is investing heavily in the Burger King restaurant of the future, an endeavour that is likely to pay huge dividends for years to come.

Restaurant Brands is doing well, even with restrictions suppressing its sales. Once the pandemic ends, Restaurant Brands could blast off to new heights, as Tim Hortons bounces back and people head back to their local dining rooms after over a year of way too much home cooking.

I have been adding to my QSR stake and will continue to do so on further weakness.

The post I Bought More of This 1 Top TSX Reopening Stock appeared first on The Motley Fool Canada.

Speaking of contrarian and value investing, check out these terrific picks curated by the team here at the Motley Fool!

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

More reading

5 Years From Now, You’ll Probably Wish You’d Grabbed These Stocks…Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. You aren’t on the list to receive our newest stock picks — but it’s not too late. 2021