Warren Buffett Selloff: Should You Buy His Former Canadian Darling?

Warren Buffett wasn’t exactly excited about Restaurant Brands International (TSX:QSR)(NYSE:QSR), but maybe he should have been a bit more patient.

| More on:
close-up photo of investor Warren Buffett

Image source: The Motley Fool

Whether you’re into investing or not, you’ve still likely heard of Warren Buffett. This investor is now the world’s third-richest man, and it’s all from investing in the right places. The man is brilliant, so when he invests in something, everyone is all ears.

Yet lately, Warren Buffett has remained relatively on the sidelines. There have been a few sales and a few buys, but nothing substantial. However, investors have watching more closely during this economic downturn — and that includes Buffett’s actions with one Canadian stock.

Restaurant Brands

I’ll be honest, Warren Buffett wasn’t exactly excited about Restaurant Brands International (TSX:QSR)(NYSE:QSR), but maybe he should have been a bit more patient. Yet it’s clear to see why the investing mogul decided to completely sell the stake in the company.

Restaurants, especially fast-food chains, suffered when it came to the pandemic. People made fast-food chains a part of their daily routine. So, what was a company like Restaurant Brands going to do about it? The company slumped by 4% in revenue year over year during the last two quarters. It was August 2020 when Buffett had enough.

But since that time, investors seem to have forgiven the company. Share prices are almost to pre-crash levels, with a potential upside of 23% to go to reach those levels as of writing. And now, investors are seriously paying attention given that the company’s next earnings report is due Oct. 27, 2020.

There are economists that believe the company will beat earnings estimates for the company. The company predicted revenue will drop by 8.3% year over year, so if it does better than that this could see shares rise up. Another part that could cause a short-term rise also comes down to plans and implementation from the company on how to handle the pandemic.

Restaurant Brands has upped its game when it comes to drive thru and the use of digital channels. This alone can account for such a recovery in share price since March. The company was even able to open up over 4,500 restaurants in the second quarter of this year. While Burger King and Tim Hortons remain on the low level, its Popeyes Louisiana Kitchen still continues to triumph, with the brand causing a 24% sales growth.

Another bonus is that even should there be reversing back into different stages of the pandemic, we are unlikely to see these businesses close like they did during the lockdown. The preparation has been made, so there shouldn’t be the sharp decline in sales we saw before.

If you look long term, this company has strong historical growth of 66% in the last five years. It also has a solid 3.71% dividend yield as of writing. Investors should pick up this stock and hold onto it for years, and not be swayed by Warren Buffett in this instance. Restaurant Brands is due for a comeback, and when it happens, be ready.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC.

More on Coronavirus

Aircraft wing plane
Coronavirus

Air Canada (TSX:AC) Stock: Ready to Take Off?

While Air Canada is handling what it can control really well, there are many worsening macro headwinds that will likely…

Read more »

rail train
Coronavirus

Bull or Bear: Why Analysts Changed Their Tune on Aecon Stock

Analysts had been champing at the bit for the construction company, but the tides have turned.

Read more »

Biotech stocks
Coronavirus

Is Bellus Health Stock Still a Buy After 30% Earnings Jump?

The biotech continues to make progress on obtaining FDA approval for its chronic-cough therapy.

Read more »

grow dividends
Coronavirus

Goodfood Stock Likely to Double in 2022!

Goodfood (TSX:FOOD) stock has had a huge rise and fall in the last few years. But at $1.85 a share,…

Read more »

grow dividends
Coronavirus

Canfor Stock Pops 5% as Sales Climb 15% YOY

Canfor (TSX:CFP) stock remained positive about its future in the global lumber market after profits climb 15% year over year.

Read more »

edit Safety First illustration
Coronavirus

2 Crash-Proof TSX Stocks I’d Buy With $5,000

These two TSX stocks have proven they can handle this economic downturn and likely will continue to be safe far…

Read more »

TSX Today
Coronavirus

What to Watch on the TSX on Tuesday, April 26

Earnings continue to come out on the TSX today, including Air Canada (TSX:AC). Meanwhile, investors may want to continue watching…

Read more »

think thought consider
Coronavirus

Should Investors Buy Goodfood Stock Ahead of Earnings?

Goodfood (TSX:FOOD) stock dropped on Wednesday ahead of the company's earnings release. And it's unclear whether there will be anything…

Read more »