As COVID-19 Lockdowns Loosen, These 2 Stocks Will Soar

Canadian Tire Corp. (TSX:CTC.A) and another severely undervalued stock that could soar as the COVID-19 lockdowns loosen in summer.

| More on:
Coronavirus written newspaper close up shot to the text.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The Great COVID-19 Shutdown will soon be in the rear-view mirror, as the economy reopens its doors for business in gradual phases. While there’s no telling whether there will be a second significant wave of COVID-19 cases later in the year, many stocks within beaten-up sectors of the economy stand to recover some, if not all, of the ground, lost amid the COVID-19 crash.

COVID-19-induced shutdowns have forced revenues of many retailers, restaurants, and travel firms to nosedive. As restrictions ease and consumers are freer to spend as they desire, we’ll undoubtedly witness some sort of relief across some of the hardest-hit sectors of the economy, as it becomes safer to return to the pre-pandemic normalcy that many of us have been longing for after months of quarantine and self-isolation.

Without further ado, here are two stocks that could soar on the economic reopening over the coming months. Both stocks coincidentally sport 3.6% dividend yields, which are slightly higher than that of their respective means.

Canadian Tire: A retailer that will roar as COVID-19 restrictions ease

Canadian Tire (TSX:CTC.A) stock had been decimated by the COVID-19 crash. Shares cratered well over 45% in a matter of weeks, but were quick to correct to the upside (CTC.A stock is currently up 53% from March lows) in April, when I pounded the table of shares of the heavily out-of-favour retailer.

Canadian Tire, which had found itself under the crosshairs of short-sellers in 2019, is a brick-and-mortar retailer first and foremost. The e-commerce platform helped the firm salvage sales amid lockdowns, but the company will likely continue to derive an overwhelming chunk of its sales via its physical locations given the “see-in-person-before-you-buy” nature of many of the goods that Canadian Tire sells.

As store traffic bounces back over the summer, we could also witness some pent up demand for many big-ticket discretionary items that wouldn’t have made sense to purchase online. With some quarters of relief coming and enough liquidity to survive another lockdown, Canadian Tire remains a top pick heading into the summer months with shares trading at 1.87 times book.

Restaurant Brands International: A dividend king that could hit $100 by year-end

Fast-food firms took a hit to the chin amid COVID-19 lockdowns, as dining in became disallowed. To this day, many restaurants and fast-food establishments remain reluctant to open their doors to their dining rooms in the initial phases of the economic reopening.

As COVID-19 infections continue dropping and as more advanced phases of economic reopening are reached, though, fast-food firms like Restaurant Brands International (TSX:QSR)(NYSE:QSR) have a tonne of room to run.

Fast-food firms like Popeyes and Burger King could witness a sales surge, perhaps abruptly to (and even beyond) pre-pandemic heights, as consumers longing for a return to normalcy rush back to the dining rooms of their favourite eateries.

Restaurant Brands stock has nearly doubled off its March bottom, yet the stock remains undervalued if you’re in the belief that sales will rocket as lockdowns loosen.

Foolish takeaway on these COVID-19 stocks

Both Canadian Tire and Restaurant Brands look to be timely buys as the lockdowns loosen in phases. That said, both names could still be at great risk of surrendering significant ground should another wave of COVID-19 outbreaks be in the cards at some point in the future.

Fortunately, the liquidity positions of both companies remain strong enough to make it through this horrific typhoon. And should a vaccine unexpectedly land, both stocks could correct very sharply to the upside.

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 Joey Frenette owns shares of RESTAURANT BRANDS INTERNATIONAL INC. The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC.

More on Dividend Stocks

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Why Real Estate Stocks Are a No-Brainer Addition to Your Portfolio

Real estate stocks, especially REITs, offer some distinct advantages over other types of stocks, making them must-have additions to most…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Dividend Stocks to Buy for Monthly Passive Income

Top TSX stocks with monthly dividends now trade at cheap prices for investors seeking passive income.

Read more »

Canadian Dollars
Dividend Stocks

Create Free Passive Income and Turn it Into Thousands With 1 TSX Stock

If you can't afford to invest, you can certainly create passive income another way and use that to invest in…

Read more »

Payday ringed on a calendar
Dividend Stocks

Canadian Dividend Investors: 2 ETFs That Pay Monthly Income With High Yields

Dividend ETFs often pay out monthly distributions compared to dividend stocks.

Read more »

think thought consider
Dividend Stocks

2 Stocks I Own and Will Buy More of if They Fall

Stocks tend to go up in the long run. Therefore, buying a basket of diversified stocks on dips should lead…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

2 Oversold TSX Dividend Stocks to Buy for Passive Income

Blue-chip dividend stocks such as Royal Bank of Canada and Manulife Financial pay investors a tasty forward yield.

Read more »

TFSA and coins
Dividend Stocks

TFSA Passive Income: 3 Solid Stocks to Earn $355 Every Month

Looking to earn steady passive income? Here are three solid TSX stocks that can help you earn a worry-free passive…

Read more »

Technology
Dividend Stocks

RRSP Investors: 2 Stocks to Buy in August for Dividends and Capital Gains

RRSP investors can still find top TSX dividend stocks trading at cheap prices today for a buy-and-hold portfolio.

Read more »