Now that the dust has settled and markets are inching higher, many Canadians may be feeling a tad more comfortable putting their 2023 TFSA (Tax-Free Savings Account) contribution of $6,500 to work.
Undoubtedly, the tech-heavy Nasdaq 100 has really taken off, with a lot of holdings that may be sporting price-to-earnings (P/E) ratios on the higher side of the range. Despite the hot start, I still think TFSA investors can find value in other sectors to improve their odds of outpacing the TSX Index (or even the S&P 500) over the next five years.
The tech industry has been the place to invest these days. Doubt the sustainability of gains in hot artificial intelligence (AI) stocks, if you will. But I do not think the run will end in tears (look back no further than last year!) this time around. Why?
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Recession or not, there’s no shortage of value
Despite the momentum, many Nasdaq 100 components are still well off their highs. Of course, some hit new highs, but for the most part, the group is still clawing back from what now seems to be excessive bearishness from last year regarding a recession that may or may not happen.
Predicting recessions can be tricky, especially during unprecedented times. The pandemic, inflation, and rate surge have complicated things. With many Baby Boomers slated to retire, they’ll continue to spend some pretty sizeable nest eggs.
Undoubtedly, Boomers have a tremendous influence on consumer spending. And the cohort may just be able to keep consumer spending strong enough to prevent a disastrous downturn. In short, don’t be shocked if a recession doesn’t happen and stocks keep moving higher from current levels.
With that in mind, here is one Canadian stock to consider if you’re ready to start doing some buying for your TFSA.
Restaurant Brands International
Restaurant Brands International (TSX: QSR) is a fast-food underdog that’s on a mission to become one of the top dogs again. Indeed, Burger King, one of the brands in the Restaurant Brands portfolio has been delivering exceptional results of late. These results are thanks in part to a more challenged consumer in search of better value for their money.
That said, we cannot discount the company’s past efforts to “reclaim to flame.” Store traffic has crept higher, and as QSR continues to spend on initiatives to improve the overall customer experience, I do not expect recent strength will dissipate anytime soon. It’s not an outlier, it looks like the start of an impressive trend.
Indeed, you need more than just a plan to transform a huge brand like Burger King. You need expertise. And with former Domino’s Pizza exec in Pat Doyle in the driver’s seat, it should be no mystery as to why Burger King has helped lift QSR stock to its elusive multi-year highs just north of $100 per share.
I think new highs could be in the cards, as Burger King continues firing on all cylinders, while the firm looks to jolt its other three brands in Popeyes Louisiana Kitchen, Tim Hortons, and Firehouse Subs.
The bottom line
The king is back. As Restaurant Brands continues investing in the right areas, expect more performance from the stock. At $99 and change, the stock looks like a steal, given recent momentum and the juicy 2.92% dividend yield. At 23.12 times trailing price to earnings, the stock is reasonably priced, with plenty of upside, as it looks to reinvent itself.
