WARNING: Warren Buffet SOLD This TSX Stock — Should You?

Find out which growth stock got dumped by the Oracle of Omaha, and why names like CIBC (TSX:CM)(NYSE:CM) might be better buys.

| More on:
You Should Know This

Image source: Getty Images

Consumer staples assets were among the early winners in the pandemic market crush. As the logic goes, people always need to eat. And so big names in the grocery space became solid performers, with Loblaw Companies and Alimentation Couche-Tard remaining sturdy. Certain fast-food names such as Restaurant Brands (TSX:QSR)(NYSE:QSR) also made the grade, thanks to their “essential industry” status. But how has this latter name fared of late? Let’s explore.

Warren Buffett sells Restaurant Brands stake

Monday saw the share price of Berkshire Hathaway favourite Barrick Gold soar by over 11%. Warren Buffett’s souring on banks also took its toll on the markets. Divested Goldman Sachs was down by just over 2%, Wells Fargo down 2.7%, and JP Morgan Chase was down 2%. Clearly, Warren Buffett’s decisions can still move markets. Now look at Restaurant Brands’s share price. The fast-food umbrella company lost 2.7% in five days.

The reasoning behind Berkshire Hathaway’s sale of Restaurant Brand shares is somewhat mysterious. This name had been fairly resilient during the worst of the pandemic jitters. But it is now down by 27.4% year over year, with a loss of more than 8% in the last four weeks. So, is the market cooling on Restaurant Brands, which is considered a growth name in the defensive consumer staples space?

Not entirely. Consider its quarterly earnings reports during the year to date. Its Q2 was solid, exhibiting earnings and revenue estimate beats. This explains why news of Buffett’s big divestment didn’t put too much of a dent in the Tim Hortons owner’s share price this week. Still, the fact that Berkshire Hathaway had sold its stake in the restaurant umbrella company should be a cause of concern to shareholders. But with a 3.8% yield and so-so valuation, this name looks like a hold.

Alternative plays for growth plus a rich yield

While Restaurant Brands ticks some of the boxes for a consumer staples play, its shareholders are likely more interested in its mix of growth and passive income. Other names in the consumer staples space, such as Nutrien, Maple Leaf Foods, and the retailers named above all offer exposure to this defensive asset type. Growth investors ditching Restaurant Brands may therefore wish to look elsewhere.

Investors seeking a mixture of growth and dividends should consider adding a bit of “necessary risk” to their portfolios. At some point, chewed up industries such as insurance, real estate, banking, and energy will begin to recover. This may take some time, of course, so investors should check their exposure to these sectors, gauge their own financial horizons, and weigh their attitude to risk.

With these caveats in mind, consider such rich-yielding names as Brookfield Property Partners, CIBC, Enbridge, and Manulife Financial. While none of these would, under normal circumstances, be considered a growth stock, per se, these are not normal times. All four stocks resemble catapults that have been stretched back, primed for attack. Their yields are also some of the richest among quality stocks on the TSX.

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 Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC, Brookfield Property Partners LP, Nutrien Ltd, and RESTAURANT BRANDS INTERNATIONAL INC.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »