Volatility is often the price you pay for a shot at solid results over time. In other words, it really is par for the course for equities. And while there’s really no way around this when the broad markets experience increased turbulence, I do think that the best way to combat the wild swings is to stop focusing on the day-to-day and focus more on the year-to-year, or, if possible, decade-to-decade.
It’s hard to be fully committed for the long haul, especially when the bad news comes in, and we begin to doubt our investment theses while experiencing a bit of regret as our positions are down 15% or even 30% from the price we entered. While things can certainly change for the worse, investors must ask themselves if anything truly devastating has changed about the longer-term narrative.
Of course, the rise of profoundly disruptive technologies (think AI) could upend an industry (think various seat-based software) and business models. But, at the same time, it’s quite easy to overestimate the impact (just look at the panic-driven reaction that software stocks endured earlier this year). For the most part, though, a company you still believe in should be held onto or, if you’ve got the dry powder and conviction, added to on weakness.
Of course, it’s all right to have a change of heart if something from out of left field comes along to shoot down the reasons you decided to punch a ticket in the first place.
But if you’re one of the many investors who are looking for reasons to hit sell because of a sudden downward move, perhaps it’s best to take a step back rather than letting yourself become convinced by excessive negativity at a time of potentially temporary pessimism. In any case, this piece will look at a dividend-paying name I view as more than worth holding amid recent turbulence.
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Restaurant Brands International
Enter shares of Restaurant Brands International (TSX: QSR), which have corrected more than 10% from the year’s highs. Things seemed to be going so well for the firm behind Tim Hortons, Burger King, Popeye’s Louisiana Kitchen, and Firehouse Subs.
The firm arguably scored high marks for its modernization efforts across its brands in a fast food climate that’s been unfavourable, to say the least, amid rising costs for nearly everything, from labour to ingredients and just about everything in between.
As the so-called “value wars” get more vicious, my guess is that the industry challenges will persist for a while longer. And for investors, that could mean the choppy ride is here to stay, especially as the Bank of Canada looks to hike rates, which isn’t good news for a firm that invests quite a bit to expand its physical footprint and value proposition.
While things look tough for QSR, they could be a whole lot worse. Indeed, many big names in the quick-serve restaurant scene are under serious pressure right now.
Many are deep into a bear market. Relatively speaking, QSR has been wonderfully resilient. And as the firm keeps scoring the little wins, my guess is it can gain share, even in such a brutal climate for many fast-food giants that have been on the ropes for a few years now. With a decent 3.6% dividend yield and more traction relative to rivals, I’d stay the course, even if lower-income consumers skip their favourite chains and eat at home.
