Should You Consider Investing Your Money in Restaurant Brands International (QSR)?

Pershing Square Holdings Ltd, an investment management firm, published its fourth-quarter 2020 investor letter – a copy of which can be downloaded here. A net return of 70.2% was recorded by the fund for the year-end of 2020, outperforming its S&P 500 benchmark that delivered an 18.4% return in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Pershing Square Holdings, in their Q4 2020 investor letter, mentioned Restaurant Brands International Inc. (NYSE: QSR) and shared their insights on the company. Restaurant Brands International Inc. is a Oakville, Canada-based fast food restaurant company that owns Tim Hortons. Burger King, and Popeyes. It currently has a $19.98 billion market capitalization. Since the beginning of the year, QSR delivered a 7.27% return, impressively extending its 12-month gains to 88.31%. As of April 01, 2021, the stock closed at $65.55 per share.

Here is what Pershing Square Holdings has to say about Restaurant Brands International Inc. in their Q4 2020 investor letter:

“QSR’s franchised business model is a high-quality, capital-light, growing annuity that generates high-margin brand royalty fees from three leading brands: Burger King, Tim Hortons and Popeyes. The company nimbly navigated difficult market conditions in 2020 by assisting franchisees, while maintaining its long-term growth potential.

As the COVID-19 pandemic began, management undertook a series of steps to secure and strengthen the business. The company quickly bolstered safety procedures and shifted marketing spend to highlight the off -premise options available to customers, while supporting its franchisees with fee/cap ex deferrals and liquidity programs. Throughout the year, the company accelerated its digital investments by expanding its delivery footprint, modernizing its drive-thru experience, increasing mobile ordering adoption, and improving its loyalty programs.

While the company’s sales were negatively impacted by the pandemic, comparable sales have already recovered or are well on their way to recovery. Burger King U.S. returned to growth in January; Tim Hortons improved to a high-single-digit decline in Canada during the fourth quarter, and Popeyes U.S. grew 16% in 2020. To accelerate the recovery at Tim Hortons in Canada, the company has committed additional funds to bolster its advertising, and support continued enhancements to its Tim’s Rewards program.

We continue to believe each of Restaurant Brands’ concepts will emerge stronger from this crisis as their business models are competitively advantaged in a socially distant and more budget-conscious consumption environment, and as the company continues to invest in drive-thru, delivery, and digital. We believe QSR’s long-term unit growth opportunity is still intact, and we expect unit growth to return to its mid-single-digit growth rate this year. As investors begin to see the results of these efforts, and underlying sales trends at each of its brands continue to improve, QSR’s share price should more accurately reflect our view of its business fundamentals.”

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Our calculations show that Restaurant Brands International Inc. (NYSE: QSR) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Restaurant Brands International Inc. was in 39 hedge fund portfolios, compared to 33 funds in the third quarter. QSR delivered a 7.27% return in the past 3 months.