While pandemic-resilient tech is a great place to be should the pandemic plague the economy through 2021, one must never lose track of the price they’ll pay. Yes, such names could improve your odds of helping you double your money, especially amid today’s choppy market. But prudent investors should ensure that they’re not looking to play the game of greater fools (that’s based on the greater fool theory, and no, it has nothing to do with us here at the Motley Fool!) in their pursuit of a double.
Chasing momentum could technically result in a quick double, but you’d also be at high risk of holding the bag once it comes time to cash out, and a stock’s market price inevitably falls back towards its intrinsic value range.
It’s important to remember that even the greatest growth businesses with the most profound tailwinds to its back can be a sell if the price isn’t right. Heck, all those battered firms that have seen their cash flows decimated by the pandemic may prove to be better buys in two the next two years over the sought-after recession- and pandemic-resilient growth firms if their market prices are considerably below their intrinsic value ranges.
Severe undervaluation could pave the way for a double
This piece will look at a robust name that I believe to be severely undervalued, with a high chance of doubling as we gradually move out of this pandemic. With a safe and effective coronavirus vaccine likely within the next two years, the following company could have a high chance of correcting sharply to the upside, as it becomes easier to value once we have more clarity with the pandemic timeline.
Of course, the pandemic could drag past 2022 in a worst-case scenario. If that’s the case, the following firm will still be standing given its solid balance sheet, which will better enable it to survive this crisis and avoid substantial long-term business erosion.
The restaurant scene is about to change forever, if it hasn’t already
Without support from the government, many less-liquid restaurants could go under if we’re due for a second or third wave of COVID-19 cases and shutdowns. The restaurant business was tough enough before the pandemic struck. With the potential for reopening rollbacks and increased spending on personal protective equipment (PPE), the restaurants will be fighting for their lives, and sadly, many won’t make it out of this crisis alive.
Restaurant Brands is one of the few restaurants that I view as a long-term beneficiary from this pandemic. The company has seen its sales implode amid the crisis. Still, with much effort put into mobile and delivery, the fast-food kingpin will rise out of this pandemic with a stronger presence on the mobile and delivery front. Moreover, Restaurant Brands will be in a spot to benefit from the less-competitive environment once dining rooms are safe to reopen for good.
One must also remember that the spike in unemployment from this crisis could linger on longer than this pandemic. If we’re stuck in a recession for several years, the demand for fast food will likely increase at the expense of pricey meal kits and fancy dine-in restaurants, as consumers become too lazy to cook their own meals.
Restaurant Brands is a misunderstood stock that will make it through this crisis to thrive in what’s likely to be a difficult recessionary environment and a less-crowded restaurant scene. The stock sports a 3.7%-yielding dividend that’s not going anywhere thanks to the firm’s capital-light business model that’s more than capable of holding up amid this perfect storm.
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.