The TSX Index may have bounced back quickly from its September-October bout of turbulence, but there are still many on-sale Canadian stocks worth adding to your buy or watchlist going into November. In this piece, we’ll have a look at two names that look rather timely at this juncture.
Although they’re bounced back modestly from their recent bottoms, both names still seem to be relative bargains, especially for investors who find themselves overweight U.S. securities. Sure, the favourable exchange rate makes a strong case for chasing some top performers just south of the border. However, with stretched valuations across the board, staying domestic with your next big stock purchase may be the way to go if you consider yourself a value-conscious investor.
On average, valuations are more attractive in Canada, and here are two of my favourite TSX stocks to buy or watch today:
Canadian Tire
Canadian Tire (TSX: CTC.A) is an iconic retailer that slipped 18% from its 52-week high hit back in late spring of 2021. Recent results have been extraordinary, topping on the bottom line for four consecutive quarters by a considerable margin. Why is Canadian Tire back on the retreat? It seems as though investors expect discretionary spending to exhaust itself going into the back half of 2021 and 2022. Yes, there are subtle signs of a slowing economy, but Canadian Tire continues firing on all cylinders on the omnichannel. Despite this, the stock trades at 9.3 times trailing earnings. It just doesn’t make sense why one of the most robust Canadian retailers has seen its stock retreat so viciously.
Investors have an opportune entry point here, and I would urge them to bet on the legendary management team that continues to find new ways to grow in a challenging COVID-plagued environment. The stock yields 2.7%, which is well supported by cash flows.
Restaurant Brands International
I’ve been pounding the table on shares of Restaurant Brands International (TSX: QSR)(NYSE: QSR) pretty hard on its latest pullback following underwhelming third-quarter results. The fast-food world got hit pretty hard by labour shortages in the Great Resignation. There are no easy ways around the issues, and, arguably, Restaurant Brands has done a less-than-stellar job than its peers of alleviating the problem. Still, such pressures are transitory, making a solid case for buying QSR stock on the dip.
The management team isn’t my favourite. In fact, they’ve had more than their fair share of stumbles through the years, especially at Tim Hortons. Indeed, it’s tough to get behind a company whose management has a sub-par track record. Still, the valuation, I believe, more than makes up for it. And the brands are just too good to ignore, regardless of who’s running the show!
The brands — Tim Hortons, Burger King and Popeyes Louisiana Kitchen — are some of the best in the industry. In the right hands, the stock could blast off, and with a structure that allows for future M&A opportunities, investors would be wise to consider the name, as it falls further into bear market territory.
The power of a good brand, or, in the case of QSR, three legendary brands, should not be underestimated, especially in the face of near-term issues that don’t change the long-term fundamentals. Undoubtedly, labour shortages will weigh over the medium term, but there’s a remarkable 3.6% dividend yield to collect while you wait for the tides to turn.
With three legendary brands, a juicy dividend, and an unbelievable valuation (3.3 times sales), the only question mark is the trajectory of management moving forward. If QSR can get the leadership it needs to be the best it can be, shares could easily outpace the rest of the quick-serve industry. It’s a significant “if,” but with nothing but negativity baked in these days, the risk/reward scenario is among the most attractive on the TSX.
