Last week, the Dow Jones Industrial Average posted its largest-ever point drop as coronavirus fears ravaged global markets and shook investor confidence. On Thursday, the Dow fell 1,190 points in a single day, tumbling about 12% for the entire week. The TSX fared slightly better, narrowly avoiding correction territory, albeit still took a beating as global macro concerns and domestic issues weighed.
In the midst of all this, one investor sounded characteristically unfazed.
Warren Buffett, the “Oracle of Omaha,” said in an interview that Monday’s stock market dip was “good for us,” adding that he “certainly won’t be selling any shares.” As the market selloff continued through the week, he gave no indication that he was changing his mind.
Buffett’s take was a stark contrast to the fear and panic that swept over most investors in Wall Street’s worst week since the financial crisis. Yet, as you’re about to see, it was perfectly in line with the investing philosophy that has made him filthy rich.
“Be greedy when others are fearful”
One of the core tenets of Warren Buffett’s investing philosophy is to “Be fearful when others are greedy, be greedy when others are fearful.” Simply put, this means to buy stocks when markets are going down and be cautious when they’re going up. It may sound strange, but every investor knows that you need to buy low and sell high.
Logically, your best chance of buying low is after markets have taken a sustained beating, so it’s not surprising that this contrarian philosophy has worked out well over the years.
One Canadian stock Buffett likes
If you’re a fan of Buffett’s investing philosophy, one stock you might want to look into is Restaurant Brands International Inc (TSX:QSR)(NYSE:QSR). Restaurant Brands is a fast food behemoth formed by the merger of Tim Horton’s and Burger King in 2014.
The merger resulted in the largest Canadian-headquartered fast food company at the time. Since then, it’s gone on to acquire Popeye’s Louisiana Kitchen, which increased its reach significantly.
Warren Buffett’s Berkshire Hathaway owns a $493 million stake in QSR, making it a fairly large position for the world’s most followed portfolio. As for why Buffett likes it, that’s not too hard to see.
With a 12% profit margin and ultra-high 28% return on equity, it’s highly profitable. As an owner of popular and well-known fast food companies, it has name recognition and a possible economic moat. Finally, the company posts solid, if not amazing earnings results most of the time.
In its most recent quarter, the company posted 10% sales growth, with particularly strong growth from Popeye’s, which saw its sales pop 42%. The company also posted solid free cash flow and cash from operating activities.
While QSR isn’t a super high grower, it’s a stable company capable of cranking out solid enough earnings growth year after year–exactly the type that Buffett likes.
