Finding great Canadian companies isn’t hard.
Hand-picking three companies Warren Buffett would approve of is a bit more difficult. In this article, I’ve chosen three such picks for Canadian investors to consider.
Canadian National Railway
The railroad sector is one which Warren Buffett has remained a strong believer in over the years. While the Oracle of Omaha has traditionally focused on U.S. railroads, Canada has a few great options for investors. My top pick in the Canadian railroad space has to be Canadian National Railway (TSX:CNR)(NYSE:CNI).
This railroad has some of the best recession-proof fundamentals on the TSX. Operating in a sector with extremely high barriers to entry, the advantage goes to the long-term investor. Canadian National has high levels of pricing power and has passed on its earnings over time to shareholders. The company’s dividend has increased steadily over time at an impressive clip. This stock is a great stocking stuffer for those income-oriented family members or friends.
Fast food is always a great investment. Those who think burger sales will find a way to decline over the long term have been proven wrong time and again.
Restaurant Brands International (TSX:QSR)(NYSE:QSR) is the parent company of Burger King, Popeyes Louisiana Kitchen, and Tim Hortons. Investors may be aware of the Buffett relationship to this stock. Mr. Buffett was involved in the $11 billion takeover of Tim Hortons at the time by QSR. In fact, the Oracle of Omaha provided $3 billion in preferred equity financing to make the deal happen, earning a few quick billions in a few short years.
This is a great company, one which will stand the test of time. This is also a company Warren Buffett has personally vouched for, putting his money to work on the Tim Hortons deal. If you’re a believer in the quick service retail market, this is perhaps the best way to play this space today.
Canadian Apartment REIT
Finally, for more of a unique pick, I give you Canadian Apartment REIT (TSX:CAR.UN). This is not a stock Buffett has owned in the past or has any affiliation to. However, this is a Buffett-style investment that certainly looks cheap at these levels.
Apartment REITs have been hit hard as a result of the coronavirus pandemic. Investors became acutely concerned about the ability of such investment vehicles to retain rent payments. In the case of Canadian Apartment REIT, and most of its competitors, this has not turned out to be a big issue. Rent deferrals and non-payments only accounted for a small fraction of overall revenue.
This REIT is very cheap relative to its dividend payout and offers a nice income stream for investors bullish on real estate at these levels. Being greedy when others are fearful is, after all, a Buffett mantra.
Warren Buffett is one of the greatest investors of all time. These three Canadian stocks would pass his test.
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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 Chris MacDonald has no position in any of the stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of and recommends Canadian National Railway. The Motley Fool recommends Canadian National Railway and RESTAURANT BRANDS INTERNATIONAL INC.