The COVID Crisis Is Ending: Prepare for a Stronger Economy

COVID will be over soon, which means stocks like Recipe Unlimited Corporation (TSX:RECP) could rebound strongly.

| More on:
Female friends enjoying their dessert together at a mall

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

After a year and a half of deaths, lockdowns, and job losses, we’re finally coming to the end of this crisis. At the time of writing, 78.3% of eligible Canadians have had their first dose of the vaccine, while 42.8% have been fully vaccinated. Herd immunity could be just a few months away.

The economy, however, has already reopened. Bars, restaurants, malls, cinemas and vacation hotspots are in full swing. Meanwhile, Canadian households have excess savings and pent-up demand for travel and leisure. All this means that the economy could bounce back stronger and faster than ever. 

Here’s how investors should prepare for this rebound. 

Rebound stocks

Companies in the travel, leisure, and consumer sector are probably having one of their best quarters right now. This rebound will be fully reflected in their balance sheets in the months ahead. 

Recipe Unlimited (TSX:RECP) is a great example. The company owns and manages restaurant brands across the country. Most of its outlets, including the Keg, Burger’s Priest, Swiss Chalet, Harvey’s, Second Cup, Kelsey’s Neighborhood Bar & Grill, and Montana’s Cookhouse, rely on indoor dining for much of their revenue. This revenue was stunted during the lockdowns. 

Now that provinces are reopening, data suggests restaurant reservations have bounced back strongly. In fact, without mandatory restrictions, bookings would have surpassed their pre-crisis levels. That’s great news for Recipe Unlimited. 

The stock has already doubled in value over the past year. It is currently trading at a forward price-to-earnings ratio of 12.8. If earnings surpass expectations, the stock could prove to be even cheaper in hindsight. 

Inflation hedges

Excess savings and pent-up demand while supply remains constrained could lead to high prices. Analysts and investors are increasingly concerned about inflation over the next few months. Last month’s inflation rate of 3.6% was the highest in over a decade. 

Much of this inflation is driven by one key commodity: oil. That’s why undervalued energy stocks like Suncor (TSX:SU)(NYSE:SU) are ideal inflation hedges for the year ahead. Suncor stock is up 38.4% year to date, while West Texas Intermediate (WTI) crude is up 52.4% over the same period. 

Some investors are now bracing for the price of crude oil to cross triple digits in the months ahead. That could push Suncor stock much higher. Meanwhile, the stock trades at a price-to-book value ratio of 1.29. It also offers a dividend yield of 2.8%. That valuation and the prospect of higher oil prices makes Suncor an ideal bet for 2021. 

Bottom line

Fortunately, this global crisis seems to be close to a final resolution. Record levels of the Canadian population have had their first dose. By late 2021, the country could have achieved herd immunity. That will mean the economy could be reopened fully.

For stocks like Recipe Unlimited, that’s great news. Early indicators suggest pent-up demand could broaden its top line in the months ahead. However, investors should also be concerned about inflation and add hedges like Suncor to the portfolio.

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 has no position in any of the stocks mentioned. Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. 

More on Tech Stocks

Automated vehicles
Tech Stocks

Want to Be a Millionaire? This 1 Canadian Stock Could Soon See a Blistering Rally

If you can take the risk of buying falling shares of some companies with a solid growth outlook, they could…

Read more »

Money growing in soil , Business success concept.
Tech Stocks

Got $1,000? Buy These 3 Top Growth Stocks

These three Canadian growth stocks could deliver superior returns over the long run.

Read more »

Man making notes on graphs and charts
Tech Stocks

TFSA Investors: 2 U.S. Stocks I’m Never Selling

Are you looking for U.S. stocks to hold in your portfolio? Here are two stocks I’m never selling!

Read more »

grow money, wealth build
Tech Stocks

TFSA Cash: Turn Your $81.5K Into $330K by 2032

These Canadian stocks have the potential to deliver average annual returns over 15% and create significant amount of wealth for…

Read more »

Male IT Specialist Holds Laptop and Discusses Work with Female Server Technician. They're Standing in Data Center, Rack Server Cabinet with Cloud Server Icon and Visualization
Tech Stocks

1 TSX Tech Stock to Buy Today and Forget for the Next 5 Years

This high-growth tech stock could multiply your invested money in the next five years if you buy it in time.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Tech Stocks

TFSA Investors: Got $6,000? Here’s How You Can Power Up Your Portfolio

Are you trying to find stocks to add to your TFSA? Here’s how you can power up your portfolio!

Read more »

Hand holding smart phone with online shop concept on screen
Tech Stocks

Shopify Stock or Lightspeed Stock: Should You Buy Either?

Shopify stock (TSX:SHOP)(NYSE:SHOP) and Lightspeed stock (TSX:LSPD)(NYSE:LSPD) are both up in the last month, but should you buy?

Read more »

Tech Stocks

Got $300? 2 Simple TSX Stocks to Buy Right Now

These two TSX stocks aren’t as popular as other names, but they are smart buys right now because both are…

Read more »