Restaurant Brands International (QSR) Has Fallen 24% in Last One Year, Underperforms Market

If you are looking for the best ideas for your portfolio you may want to consider some of Pershing Square Capital Management’s top stock picks. Pershing Square, an investment management firm, is bullish on Restaurant Brands International Inc. (NYSE:QSR) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Restaurant Brands International Inc. (NYSE:QSR) stock. Restaurant Brands International Inc. (NYSE:QSR) is a fast food restaurant company.

On August 13, 2019, Pershing Square had released its Q2 2019 investor letter. The investment firm said that Restaurant Brands International Inc. (NYSE:QSR) was one of the biggest contributors to its performance for the first six months of 2019. The stock has posted a return of -24.0% in the trailing one year period, underperforming fund’s benchmark the S&P 500 Index which returned 21.0% in the same period. This suggests that the investment firm was wrong in its decision. On a year-to-date basis, Restaurant Brands International Inc. (NYSE:QSR) stock has fallen by 10.7%.

Last month, we published an article revealing Pershing Square’s bullish investment thesis on Restaurant Brands International Inc. (NYSE:QSR) stock in its Q2 2020 investor letter. This suggests that the investment firm has been bullish for a long time on Restaurant Brands International Inc. (NYSE:QSR).

Pershing Square fund posted a return of 45.3% during the first half of 2019, outperforming fund’s benchmark the S&P 500 Index which returned 18.5% in the same period. Let’s take a look at comments made by Pershing Square about Restaurant Brands International Inc. (NYSE:QSR) in the Q2 2019 investor letter.

“Restaurant Brands’ second quarter results continue to highlight our thesis that its royalty-based franchise model is a uniquely valuable business with significant long-term, global unit-growth opportunities. QSR reported strong overall same-store sales growth led by nearly 4% at Burger King, 3% at Popeyes and almost 1% at Tim Hortons. The strength in same-store sales at Burger King was driven by impressive results in the international business, which will be enhanced by accelerated growth in the U.S. business due to the recent launch of the plant-based Impossible Whopper, and its new partnership with UberEats.

Results at Tim Hortons improved from last quarter, but remain below our long-term expectations. We anticipate that momentum generated by the recently launched loyalty program has provided Tim Hortons with valuable customer insights that will help deliver improved results over time.

QSR grew net units by 5% this quarter, with 6% growth at Burger King and Popeyes, and 2% at Tim Hortons. The company announced a master franchise agreement to open 1,500 new Popeyes restaurants in China over the next decade, new units that would represent 50% of the brand’s current store base. As a result of solid same-store sales and continued unit growth, QSR’s pre-tax operating income before currency effects grew 6%, led by 10% growth at Burger King and mid-single-digit growth at Tim Hortons and Popeyes.

QSR’s shares have appreciated 45% this year, but currently trade at less than 24 times next year’s free cash flow, which represents a discount to both intrinsic value and slower-growth franchised peers. As same-store sales momentum continues to improve, we believe that investors are likely to give credit to QSR’s long-term international growth opportunities and assign a higher valuation to its shares.”

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In Q1 2020, the number of bullish hedge fund positions on Restaurant Brands International Inc. (NYSE:QSR) stock decreased by about 21% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Restaurant Brands’ growth potential. Our calculations showed that Restaurant Brands International Inc. (NYSE:QSR) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.