Canadian stocks to play the great reopening of 2021 have been bid up by a fair amount over the past year and a half — some more than others.
That said, many such names still seem to be discounting the magnitude of earnings growth to be had in an economic recovery. While variants of concern, most notably the “delta” variant that originated in India, still represent serious risks that could derail or postpone the great reopening, I still think longer-term investors should be net buyers at this critical market crossroads.
Canadian stocks perfect for the great economic reopening
However long this pandemic may drag. Whether or not there are future waves, this pandemic will end. Nobody knows when or what will happen en route to the end, but long-term investors should focus their efforts on profitability prospects beyond 2021. Long-term investors invest not only for the next year or two, which may still be plagued by the insidious coronavirus, but the next 10, 20, or even 30 years.
With such a long-term horizon, I think many Canadian stocks playing the great reopening ought to be scooped up here, as concerns over variants cause them to take a few steps back. So, without further ado, let’s get into two of my favourite TSX-traded reopening picks that I think deserve to trade at much higher valuations.
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Restaurant Brands International
Restaurant Brands International (TSX:QSR)(NYSE:QSR) is the fast-food juggernaut we all know and love for its trio of legendary chains in Tim Hortons, Burger King, and Popeyes Louisiana Kitchen. The company has had some pretty mixed success over the years. Tim Hortons has been the major sore spot that hasn’t lived up to investor expectations, with sluggish comps and a greater vulnerability to the COVID-19-induced dining room closures. The morning routine had been compromised, and Tim Hortons crumbed like a paper bag.
It’s hard to imagine that the folks behind the horrific performance at Tim Hortons are to thank for Popeyes’s legendary chicken sandwich. Last year, it was reported that the average restaurant served up 1,000 chicken sandwiches per day. That’s not just a success for Restaurant Brands; it’s a profound success for the fast-food industry, inspiring numerous copycats, including McDonald’s, to reinvent its own chicken sandwich.
With a modernization plan underway focusing on the 3 “D’s” in digital, delivery, and drive-thru, I think Restaurant Brands stock is positioned to take off. Once the pandemic ends, a huge weight will be lifted off its shoulders, and the stock will likely quickly be headed to new highs.
Couche-Tard (TSX:ATD.B) isn’t your average convenience retailer. It held its own during the worst of the first three waves of COVID-19, and it’ll continue to do so should future waves strike. With people opting to stay at home, fuel sales have been pretty muted.
Once restrictions lift for good, Couche will get a nice boost, and foot traffic will likely increase across locations, especially those adjacent to Fire & Flower cannabis shops for consumers looking to buy munchies with their weed.
In the meantime, Couche is hungry for its next acquisition. I think it could make a massive splash by year’s end, possibly in the Australasian region with a convenience-store chain or a grocery giant, whether it be Carrefour or a North American grocer.
At 15.1 times earnings, Couche is undervalued, and it’s a buy right here.
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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.
The Motley Fool owns shares of and recommends ALIMENTATION COUCHE-TARD INC. The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC. Joey Frenette owns Couche-Tard and Restaurant Brands shares.