Restaurant Brands International (QSR.TO)

Hitting all-time highs, but not because of their core business. There have been activists shareholders and there is a big share buyback happening.

Tim Hortons (THI-T) or Starbucks (SBUX-Q) for a three-year hold? About 2 months ago they did a bunch of shareholder friendly initiatives, including a new CEO who believes there are too many items on their menu. Have a dark roast coming to compete with Starbucks. They have about 77%-78% of the quick serve brewing market in Canada. If push came to shove, he would say put your money in and buy both but if you have to pick one or the other, he would go with Starbucks.

Tim Hortons (THI-T) versus Starbucks (SBUX-Q)? He definitely prefers Starbucks over Tim Hortons. This one has limited growth. Entry into the US has not worked out well for them. A lot of the upside has been because of activists coming in, and suggesting the company do something with their cash. Thinks that play is done. A tailwind is that coffee prices are at an all-time low so margins are increasing.

(Market Call Minute.) Quite an inexpensive stock. He is waiting to see what happens to it.

(Top Pick Oct 12/12, Up 30.31%) Melted up. Have agreed to take on more debt and buy back more stock. They are reassessing their expansion in the US. Don’t buy now but wait until they report and take a look at traffic growth. Look also at new product offerings that will move the ticket price up.

(Top Pick Sep 14/12, Up 20.77%) Continues to buy it on dips. One of the most wonderful companies in Canada. No limit to the growth potential. They continue to buy back stock, cash flow continues to grow and raise the dividend. If they get it right in the US or in the middle east, the opportunities are there. The stores in Canada are better than others in the US.

(Market Call Minute.)

Great company. The real key to how they do in 5 years is how they do in the US and how they do internationally. Will continue to grow in Canada and hopefully, in the US they will continue to execute. Internationally is another question. Likes the stock longer-term.

Has performed quite well in the last few weeks. A hedge fund had taken a position on the company and the company has decided to take on some debt and repurchase about 10% of their outstanding shares. Also, re-examined their US growth strategy to make some decisions and she would like to wait to see what they decide to do. Would prefer it at around $55.

2 activists are pushing hedge funds and he agrees with their findings that this company should take on some leverage to buy back stock. At this price, it is no longer a reasonable bargain. Not sure what they should do. If it fell 10% from this point, he would consider it as an opportunity.

He has recently started paying more attention to this because a couple of activist shareholders in the US have got the bit in their mouths and are hammering away about different things. Until they are satisfied, you are probably going to see some upward pressure in the stock. Good company. 1.8% dividend yield.

Scout Capital is recommending that they increase leverage to 3X EBITDA, which he feels is a very valid point. They don’t have the large-scale that they need to be in the US so they have very little control over their facilities, etc. Feels they should pull back from the US as there is a lot of competition there. Can still make a lot of money in this country. Great business, great franchise and a great brand-name.

She would add at this level. Likes it over the next 3-5 years. They are under some activist pressures to do something to surface more value. New CEO. Target price of around $60.

For many years was a great stock. Built out their business but problem is where is growth going to come from? The US market was a struggle for them. It is hard to see where you could put another one. Dunkin Donuts has a much lower multiple.

Really likes this company. Great consumer franchise. Same-store sales have slowed down a little and their US expansion is hitting a few road bumps. An activist franchise wants the company to pare back its US growth and borrow billions to fund a share buyback. Doesn’t think this will work so there could be a pull back if it fails which might be an opportunity to take some short-term profits and buy it back cheaper.