Written by Joey Frenette at The Motley Fool Canada
Sometimes, Mr. Market just has it wrong when it comes to his pricing of certain stocks. After running into a bit of market turbulence in August and September, various stocks now look like tempting buys, as the bears emerge from their caves once again!
Indeed, investor sentiment can change so quickly. As such, contrarian investors should be ready to catch Mr. Market off guard, as he looks to mark down prices across a broad batch of names, some of which may not deserve to be slammed.
In this piece, we’ll check out one TSX stock that has come on tough times in recent weeks. Though recent weakness is notable, I view the dip as buyable, even if the rest of the stock market spills over from here.
Sure, there are pockets of overvaluation, especially in the U.S. tech scene. However, the following names don’t need to be slammed further as various corners of the market look to correct themselves.
Sometimes, the market has it wrong!
Restaurant Brands International (TSX:QSR) is one intriguing stock that I think the market has wrong right now. Shares of the fast-food play are looking dirt cheap and ready for a bounce, with or without a bit of help from the rest of the market.
Now, it may take time before the market rewards shares of the value play again. Regardless, if you have a long-term (10-year horizon or more) mindset, the following plays seem more than buyable at current prices.
Restaurant Brands International stock corrects
Restaurant Brands International is best known as the firm standing behind Tim Hortons, Burger King, and Popeyes. More recently, the firm added Firehouse Subs into the lineup to diversify its exposure across more corners of the quick-serve scene. The firm now provides exposure to burgers, coffee and doughnuts, fried chicken, and submarine sandwiches. As the company looks to invest heavily in expansion, there’s less concern about overlap.
Personally, I think all QSR needs is a pizza chain (the door could be open for further deals in the year ahead), and it could be one of the most dominant players in fast food if it isn’t already! Up ahead, a recession and cost-of-living crisis could improve demand for low-cost fast food.
Inflation may be at 4% as of the latest month. However, for individual consumers, it seems like the rate is much higher. In any case, QSR seems to be in the right place at the right time, as it looks to expand its store count internationally.
At $92 and change, the stock is deeply undervalued, in my opinion. The stock recently corrected around 10% after failing to sustain a breakout past all-time highs just a few months ago. Restaurant Brands is firing on all cylinders. And I think the correction is a blunder made by an overly jittery Mr. Market.
With a nice 3.19% dividend yield, a modest 21 times trailing price-to-earnings multiple, and an underrated growth story, the stock seems like a steal right here.
The Foolish bottom line
Restaurant Brands stock has been punished with a swift correction, and for no good reason! I think it’s just a matter of time before the stock hits new highs, even as the recession moves closer. For such a firm, inflation and recession may actually be a tailwind, rather than a headwind!
Before you consider Restaurant Brands International, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in August 2023... and Restaurant Brands International wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 26 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks * Returns as of 8/16/23