Warren Buffett has bought and sold plenty of Canadian stocks in the past.
While his current Canadian bets may be worth following, I think there are other plays that Warren Buffett doesn’t own but probably should. So, if you’re a Canadian Warren Buffett fan who’s looking to invest like the Oracle of Omaha on this side of the border, I’d like to point your attention to the following Canadian gems that I believe have “Warren Buffett” written all over them.
Without further ado, consider Restaurant Brands International (TSX:QSR)(NYSE:QSR) and Badger Daylighting (TSX:BAD). Warren Buffett himself used to own shares of the former company but has yet to touch the latter one.
Restaurant Brands
I think Warren Buffett made a mistake when he ditched his stake in the Canadian restaurant behemoth behind cherished fast-food chains, including Burger King, Popeyes Louisiana Kitchen and Tim Hortons.
The latter brand, Tim Hortons, has been a major drag on Restaurant Brands over the years. It just hasn’t lived up to its full potential. The chain has failed to really find a spot with Canadians, with eyebrow-raising products like Beyond Meat burgers that are you wouldn’t think would be typical Tim Hortons fare.
The pandemic just served as salt in Tim Hortons’ wounds.
That said, I think it’d be foolish (that’s a lower-case “f”) to discount the iconic brand’s turnaround potential, as it takes a step back to focus on what made the brand so great in the first place. With activist investor Bill Ackman still aboard, I think the man can be a major driving factor as it heals from and moves on from the coronavirus crisis. Ackman has been a passive investor, but this could change as the man looks to unlock the deep value to be had in the company.
Warren Buffett may have given up on the company, but I think Canadians should stay the course. Do as the man says, invest for the long term, not as the man does. While the company has its fair share of troubles, once the pandemic ends, I think the name could really roar, as dining room closures have hit the firm particularly hard.
Badger Daylighting
Warren Buffett has probably never heard of Badger. It’s a boring company that has “Buffett stock” written all over it, though. The company is easy to understand: It’s in the business of soil excavation through an environmentally friendly hydrovac digging process.
In addition, it’s unloved ahead of a potential economic boom, with magnificent ROIC (return on invested capital) numbers over the years. Before COVID hit, Badger sustained double-digit ROIC numbers. In the post-pandemic environment, I think the firm will experience earnings growth, the likes of which we haven’t seen since the rise out of the Financial Crisis.
The company has a wide moat in its fleet of hydrovac-equipped trucks, with technologies and mobility that make it tough for competitors to steal Badger’s slice of economic profits.
Most importantly, Badger stock trades at a relatively cheap multiple at 2.7 times sales, 4.6 times book value, and 26.2 times forward earnings given the catalysts up ahead.
