When looking to buy stocks for your portfolio, one of the most important factors to consider, especially for new investors, is how well you know and understand the business.
One of the biggest mistakes new investors make is that they don’t realize the importance of fully understanding a business and all its operations before they buy the stock.
But without having a solid understanding of a company that you’re planning to buy, how can you accurately expect to determine if it’s undervalued, overvalued, or fairly valued?
Furthermore, how will you keep up to date with the stock after you own it to ensure that it continues to operate well and offer significant growth potential over the long run?
This is why, before making any investment, it’s essential to have a solid understanding of the company’s operations, its risks, who its competitors are, as well as how much long-term growth potential it has.
So, if you’ve got cash you’re looking to invest today and want to buy high-quality stocks right now, here are two simple companies with easy-to-understand businesses.
A simple dividend stock to buy right now
If you’re a new investor looking to buy simple but high-quality stocks for your portfolio, one of the best investments on the market is Pizza Pizza Royalty (TSX:PZA).
Pizza Pizza Royalty owns the rights to the Pizza Pizza and Pizza 73 names and earns a royalty on every sale at every location of these restaurants across Canada. And because it’s a royalty on sales and not profits, Pizza Pizza is an even simpler investment.
It doesn’t have to worry about the profitability of individual stores. Instead, Pizza Pizza’s sales and, therefore, its net income is determined by the aggregate level of sales done across the country.
And because sales don’t often fluctuate much from month to month or quarter to quarter, Pizza Pizza is not just a simple stock to buy for your portfolio; it’s also a highly reliable dividend stock.
For example, from 2016 up until the pandemic hit, the largest year-over-year change Pizza Pizza saw in its quarterly revenue was a 2.4% increase in sales back in the first quarter of 2016.
More recently, Pizza Pizza’s sales have been growing rapidly as it’s recovered from the pandemic. In fact, in the last four quarters, sales have grown 12.7% year over year. And now it’s not only fully recovered from the pandemic, it’s sales are actually exceeding what they were prior to the pandemic.
Therefore, considering that the majority of Pizza Pizza’s revenue flows through to the bottom line and is therefore used to determine its dividend, not only does Pizza Pizza’s roughly 6% dividend look safe, but it could even see more growth in the coming months.
So, if you’re looking for a simple stock to buy now, Pizza Pizza is certainly one of the best.
A high-potential recovery stock to consider today
Another simple stock to buy now is Air Canada (TSX:AC), especially as it continues to recover from the pandemic while navigating the current economic environment.
We’ve already seen a significant recovery from the airline industry as a whole, particularly when it comes to demand from consumers. However, with surging inflation over the last year, profitability for many of these stocks has continued to be impacted.
Now, however, with inflation moderating and demand for travel remaining sky high, Air Canada has a tonne of potential to see a significant recovery in both its profitability and its share price.
For example, while analysts estimate that for 2023 Air Canada’s sales will increase another 30% from 2022, Air Canada’s earnings before interest, taxes, depreciation and amortization (EBITDA) is expected to more than double and jump 168% from last year.
On top of that, analysts are expecting that Air Canada will earn $3.84 in earnings per share this year, up from a loss of $2.76 per share last year.
Therefore, while this simple stock continues to recover rapidly at the same time that it trades cheaply and well below its pre-pandemic price of more than $50 a share, it’s certainly one of the best to add to your buy list today.
