Without a doubt, one of the greatest investors of all time, Warren Buffet knows how to pick the best value stocks. Accordingly, his previous dealings with Restaurant Brands (TSX:QSR)(NYSE:QSR) and Suncor Energy (TSX:SU)(NYSE:SU) speaks volumes regarding the companies.
Yes, the Oracle of Omaha has trimmed or exited his stake in these companies of late. However, the fact that Warren Buffett has been closely involved with these companies in the past signals to investors that there’s some real value with these stocks.
Let’s take a look at why Mr. Buffett showed interest in these companies in the first place.
For investors seeking pure-play energy stocks, Suncor Energy has been a go-to option for some time. Indeed, given where WTI oil is trading today, there’s a lot of optimism around such plays. Companies like Suncor with relatively low breakeven costs per barrel are poised to become cash-flow machines. Indeed, a year ago, the discussion was very different.
Of course, any company providing investors with high leverage to oil prices carries a certain amount of inherent risk. Should oil prices revert down to 2020 levels, we could see some significant downside with these stocks. Accordingly, investors are pricing in a relatively healthy margin of safety with Suncor and its peers.
However, for those who believe the demand for energy coming out of this pandemic will be greater than 2019, perhaps these current energy prices are sustainable. Indeed, Suncor reflects bullishness with the reflation trade which remains relatively strong right now.
Given the company’s recent focus on cutting costs, I expect to see very strong margins from Suncor. Accordingly, this is a stock that could really take off in the medium-term, should investors continue to jump aboard.
Restaurant Brands is a company that has been significantly hampered by the pandemic. Indeed, the company’s share price remains well below its all-time highs, suggesting some serious room to run here.
For those bullish on the pandemic recovery thesis, this is a stock that should be on one’s radar. Indeed, Restaurant Brands’ lower-than-average valuation multiple combined with the company’s impressive growth prospects coming out of this pandemic make it a great pick to consider today.
Among the fast food banners under Restaurant Brands’ portfolio are Burger King, Tim Hortons, and Popeyes Louisiana Kitchen. These three banners are iconic and provide excellent leverage to growth in the quarters and months to come. In particular, these brands are growing quickly in the Asia Pacific region, something I expect to continue for some time.
With strategic tweaks to the company’s business, including at key banner Tim Hortons, I think Restaurant Brands can improve its underlying fundamentals from here. Accordingly, this is a growth-at-a-reasonable-price pick investors should consider right now.
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 stocks mentioned in this article. The Motley Fool recommends Restaurant Brands International Inc.