With broad markets getting hit with some selling going into the middle of November, investors might be in a bit of a panicked state, especially if they’ve recently picked up a few shares of red-hot AI names on strength. Undoubtedly, sometimes investors just get the timing wrong when it comes to the high-flying names, and that’s completely all right, provided one is in it for the long-term (not just looking for a quick buck off a trade) and is willing to add to a position on further weakness.
So, if you’re feeling a bit rattled over fading AI sentiment and fears of a rotation towards value, it may still be worth it to hold your nose and buy something in the coming week or so, especially if the recent volatility is the start of a mini-correction or even a full-blown one that entails a drop of 10% from peak to trough.
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Playing it cautiously with a value tilt amid volatility
As always, timing the market isn’t a good idea, and you should expect anything to happen after you’ve hit the buy button, including a reversal of market momentum. At the end of the day, the ups and downs are what you’re signing up for with stocks. So, don’t get too used to the good days, as plenty of bad days (and buying opportunities) will hit as well.
Personally, I wouldn’t be surprised if the AI weakness in recent sessions leads to a correction or even a bear market. In such a chaotic sell-off, not all names will be punished equally. The hot overvalued names will get penalized most harshly, in my view, while some of the less-loved value plays might actually be less impacted. In this piece, we’ll check out one name I find to be a magnificent value right here.
Restaurant Brands stock: A cheap dividend payer that’s coming off strong results
Consider shares of Restaurant Brands International (TSX:QSR), which actually finished a turbulent Thursday session up by around 2%. That’s an impressive gain on a market-wide sea of red, especially for the tech sector. The company, best known for being behind Tim Hortons, Burger King, Popeye’s Louisiana Kitchen, and Firehouse Subs, is showing serious signs of strength lately.
The last quarter was quite good, but when you consider the pains that the broad restaurant scene has been experiencing of late amid challenged consumer demand, I’d argue that the last quarter was actually quite stellar. And while the reaction has been quite positive, especially given the latest pullback in markets, I’d argue that there’s enough fuel in the tank to spark a continued run. The stock still looks modestly priced at 25 times trailing price-to-earnings (P/E).
Moving ahead, the big question is whether Tim Hortons can continue to shine. I think it can, even in the face of formidable rivals.
With a 3.6% dividend yield, a low beta (0.62 right now), and a more defensive business that might actually continue to fare well as economic prospects remain mixed (consumers want value these days), I see QSR stock as a durable winner right here.
Could shares of QSR continue to be a bright spot in a nervous market environment that’s soured on AI?
Nobody knows. But I’d much rather be in QSR stock than the hot AI trade at a time like this.
