The search for stocks to buy is on, despite concerns around a potential global recession and still-high interest rates and inflation around the globe. For investors looking to rebalance their portfolios, it’s important to consider both stocks to buy and stocks to sell to create a more favourable portfolio mix moving forward.
Indeed, investing in companies with the right valuations and in the right sectors is of the utmost importance. Here are two stocks that I think fit the right criteria for most investors, and one I think is probably worth waiting on, given this current investing climate.
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Restaurant Brands
Restaurant Brands (TSX:QSR) belongs to the fast-moving consumer goods sector. Historically, during times of volatility, this segment tends to react less in comparison to other sectors. Thus, given the current conditions, it is one of the best sectors for investors to allocate capital.
Restaurant Brands recently reported solid first-quarter (Q1) 2023 results. Its sales reached US$1.59 billion, representing impressive year-over-year growth of 9.6%. The revenues from Tim Horton, Burger King, and Popeyes Louisiana Kitchen showed year-over-year improvements of 8.6%, 9.3%, and 13.5%, respectively, while the company’s quarterly adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased to US$588 million, up 11% over the same quarter the year prior.
This is also a company that investors like for its dividend profile. Restaurant Brands recently increased its dividend payment, providing investors with a current yield around 2.9%. Thus, for those looking for a mix of defensiveness, growth and yield, QSR stock remains one of my top picks. It’s my biggest holding for a reason.
TD Bank
Toronto-Dominion Bank (TSX:TD) is well known as one of Canada’s top financial institutions. Of course, the macro backdrop hasn’t been great for banks in general of late, with various banking failures in the United States. That said, this recent dip in TD’s valuation (see below) provides investors with a great entry point, in my view.
Part of that has to do with TD’s ability to monetize higher interest rates via net interest margins (the spread the bank earns between interest paid on deposits and interest received via its holdings). Additionally, this bank has performed well of late, introducing a string of new products, and continuing to grow its footprint globally.
Lightspeed Commerce
In the stocks to sell category, we have Lightspeed Commerce (TSX:LSPD). Lightspeed is a software provider, often viewed as a high-growth tech company. Unfortunately, LSPD stock hasn’t really participated in the recent growth rally we’ve seen this year. Much of that has to do with the company’s unprofitable nature, and the potential for an upcoming economic slowdown on the horizon.
While Lightspeeds earnings results did improve this past quarter, this is a company with the sort of fundamentals I think investors want to remain cautious of. The company’s adjusted EBITDA loss has improved, but its adjusted loss remains around US$34 million. Until the company can show a path toward profitability, this is a stock that I’m not sure is worth investing in at this particular moment.
