What are your re-opening bets? Markets should continue their upward march after a brief pause this week. So, here are my top TSX stocks for the post-pandemic world.
Canadian Natural Resources
In the Canadian energy space, I like Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) more. It has got diversified revenue base, strong balance sheet, and attractive dividend profile. The energy sector as a whole continues to look poised for decent growth amid economic reopenings.
Global energy markets breathed a sigh of relief after the dispute between oil-producing countries over increasing production was resolved last week. The cartel agreed to raise output by 400,000 barrels a day through September 2022. However, this hike will not be sufficient to cater to the higher demand, which will keep the equation skewed and could drive crude oil prices higher.
CNQ, Canada’s biggest energy company by market cap, will likely report superior free cash flow this year, driven by higher energy commodity prices. So, it is one of the best TSX stocks to play the energy rally in 2021. The stock has already returned more than 100% since last year.
Its recent 12% correction in July could be an opportunity for discerned investors. As crude oil prices have resumed their upward march, CNQ’s earnings and stock will likely follow.
Premium Brands Holdings
Specialty foods has been one of the hot areas and has seen solid growth in the last few years. One TSX stock that I particularly like in this domain is Premium Brands Holdings (TSX:PBH). The stock is up almost 30% this year, beating the TSX Composite Index.
Premium Brands is a $5.5 billion food-processing company and operates top brands like Expresco, Ready Seafood, Audrey’s, Conte Foods. It generates almost two-thirds of its total revenues from the Specialty Foods segment, while the rest comes from the Premium Foods Distribution business. The company expects to grow its revenues by 12% annually by 2023.
PBH stock has returned 120% in the last five years, including dividends. It is currently trading at all-time highs and looks overvalued. Conservative investors can wait for the pullback. It should create handsome shareholder value driven by organic growth after the pandemic and recent acquisitions.
Restaurant Brands International
Another top TSX stock that has been weak on COVID-19 Delta variant fears is Restaurant Brands International (TSX:QSR)(NYSE:QSR). It has notably underperformed broader markets, returning just 6% since last year against an average of 25%.
However, things could notably change for this quick-service restaurant operator post-pandemic. It could see significant demand recovery once mobility curbs wane. This should help boost its top line, which has taken a deep dent due to the pandemic. Restaurant Brands will likely see superior growth mainly due to its established brands and unique value proposition. It operates 27,000 restaurants spread across more than 100 countries globally.
QSR plans to report Q2 2021 earnings on July 30. It will likely be the same picture on the revenue and earnings front as the last few quarters. However, how the management sees recovery in the next few quarters could change the investor sentiment. Additionally, if you are a long-term investor, I think QSR is well placed for handsome growth driven by higher demand in the normalized world.
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 recommends Restaurant Brands International Inc. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.