3 Reasons Why You Should Own Restaurant Brands International Inc.

Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR) should be a core part of your portfolio.

| More on:
The Motley Fool

When Burger King Worldwide Inc. announced its plans to buy Canadian icon Tim Hortons Inc. in August, it created the world’s third largest quick-service restaurant. But is this new company, Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR), worth investing in?

Well, there are some reasons to believe this is a great opportunity for investors. Below we look at three big ones.

1. A strong crowd

If you decide to invest in RBI, you’ll be in great company. A majority of the firm is owned by 3G Capital, a Brazilian investment management firm with an outstanding track record. Besides its 2010 purchase of Burger King, 3G is best-known for orchestrating the takeover of American brewer Anheuser-Busch (the makers of Budweiser beer), and its involvement in the privatization of Heinz.

3G is also well-known for its cost-cutting philosophy, which it applies to all newly acquired companies. It’s yielded some fantastic results — for example, 3G has tripled Burger King’s profit margins over the past four years. There’s certainly less room for improvement at Tim Hortons, but 3G’s involvement should be a big positive.

Better yet, other great investors have thrown their money into the pot. Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) owns US$3 billion of preferred shares, and also owns just over 4% of the common shares.

Pershing Square Capital Management, led by activist investor Bill Ackman, owns an 18.8% stake. Mr. Ackman has a tremendous track record, particularly in this industry, so his involvement in RBI should also make other shareholders feel that much more comfortable.

2. Growth opportunities

Before the merger, Tim Hortons was constantly questioned for its lack of growth opportunities. Those questions are long gone now. Most notably, Tim Hortons could apply the “Master Franchise JV” model, which Burger King successfully pioneered, to accelerate its international expansion. Tim’s could also leverage Burger King’s extensive partner network.

Importantly, two-thirds of the combined company’s revenue will come from Canada. So there will be plenty of potential for growth in other countries.

3. A lack of alternatives for Canadians

Let’s face it: if you’re looking for stable businesses with a good track record in Canada, there aren’t many companies to choose from. RBI is one of those few companies.

Granted, this isn’t a risk-free company. In order to finance the US$11.9 billion purchase of Tim’s, Burger King raised US$9.0 billion of debt, in addition to Berkshire’s $3 billion in common shares. And because of this heavy debt load, RBI will not pay a dividend. So if you were a Tim’s investor, and relying on that quarterly income, you could be forgiven for looking elsewhere.

That said, this new company operates some very stable businesses, has done well for shareholders in the past, has a great team of owners, and is looking at some serious growth opportunities. For a Canadian investor, such a company is hard to find.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned. The Motley Fool owns shares of Berkshire Hathaway.

More on Investing

Arrowings ascending on a chalkboard
Tech Stocks

Why I Think Nuvei Stock Has Market-Beating Potential

Given its growth initiatives, expanding addressable market, and attractive valuation, I believe Nuvei has the potential to outperform the broader…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Need Passive Income? Turn $5,000 Into $23.85 Every Month

If you're looking for passive income that comes in like a paycheque, this dividend stock provides that to you along…

Read more »

A worker drinks out of a mug in an office.
Metals and Mining Stocks

5 Things to Know About Nutrien Stock in December 2022

Trading at heavily depressed multiples, Nutrien stock is a great opportunity, as it delivers solid financial results and an optimistic…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

Shopify Stock Rose 15% in November: Is it a Buy Today?

Shopify (TSX:SHOP) stock rallied 15% this month but is still down 69% year to date, so should investors worry that…

Read more »

Man holding magnifying glass over a document

The 3 Most Oversold TSX Stocks to Watch Before 2023

Many oversold stocks are merely victims of market circumstances and potentially profitable bargains when they seem downtrodden.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

A TFSA Contribution Room of $88,000 and 1 Dividend Aristocrat Can Make You $172,330 Richer

A high-yield Dividend Aristocrat in the energy sector is a suitable holding for Canadians with $88,000 available contribution rooms in…

Read more »

Upwards momentum

Year-End Sales Tracker: 3 Growth Stocks Going for Value Prices

Growth stocks like Aritzia (TSX:ATZ) are on discount.

Read more »

Dollar symbol and Canadian flag on keyboard

2 Canadian Stocks I’ll Be Buying Hand Over Fist in 2023

Alimentation Couche-Tard (TSX:ATD) and another top growth stock could increase dividends in 2023.

Read more »