7 Restaurant Stocks to Put on Your Plate

Advertisement

Restaurant stocks - 7 Restaurant Stocks to Put on Your Plate

Source: Shutterstock

With the generally pessimistic and sometimes sensational headlines surrounding the U.S.-China trade war, it may surprise some that viable investment sectors exist. Even more surprising are some of the market segments experiencing positive sentiment. For instance, restaurant stocks are charging significantly higher than they were at the beginning of the year.

Don’t take my word for it: check out the sector benchmark Dow Jones US Restaurants & Bars Index. On a year-to-date basis, the index is up over 30%. And while the broader Dow Jones Industrial Average is no slouch at nearly 16% YTD, the performance difference is clear. So what’s driving enthusiasm toward restaurant stocks?

One explanation is that geopolitical headwinds are still too high level to impact most Americans. Yes, the trade war situation is absolutely crucial. Right now, the U.S. and China have agreed to a truce, not a trade deal. Still, the fallout from poor relations with China have not generated significant watercooler conversations.

The second and more important point is that restaurant stocks have similar traits to so-called vice or sin investments. No matter what is going on with the economy, people need an outlet. Usually, going out to eat represents a relatively cheap form of entertainment.

It’s also an excursion that families can control. A major reason why professional sports attendance is declining is due to rising costs. However, families can choose which eateries to attend based on their cost preferences. Therefore, restaurant stocks have outpaced other event or entertainment-based investments.

Finally, the National Restaurant Association forecasts a strong year for restaurant stocks. Better yet, every subsegment except one should experience a year-over-year uptick.

With that, here are seven restaurant stocks to put on your plate:

Wendy’s (WEN)

7 Restaurant Stocks to Put on Your Plate

Often lost in the mix behind big marquee names like McDonald’s (NYSE:MCD) or Burger King, Wendy’s (NASDAQ:WEN) is still a name you shouldn’t ignore. For one thing, the performance of WEN stock has done nothing but impress onlookers. Since the January opener, shares have soared nearly 28%.

Better yet, if you’re a big proponent of technical analysis, you can still make a bullish case for WEN stock. According to some momentum indicators, shares of the fast-food joint have a shot at moving past $26. Given the WEN stock price of $20.17, that would represent a sizable 33% swing.

But more importantly, WEN stock enjoys fundamental justification for such a move higher. While the company has successfully brought in more people, they’re gaining traction on another component: getting their customers to open their wallets deeper for higher-ticket items.

It’s no accident that profitability margins have improved in the second quarter of 2019. If that continues, look for WEN stock to gain accordingly.

Denny’s (DENN)

7 Restaurant Stocks to Put on Your Plate

Let’s face reality: When you’re considering a special night on the town, the name Denny’s (NASDAQ:DENN) comes nowhere on your list. DENN stock is an investment toward comfort food, and not much else. But we also have to bring up another important angle. Comfort food isn’t a bad gig, no matter what the market condition.

As far as I’m aware, every single Denny’s location is open 24 hours. Thus, if your night out extended a bit too long, there’s Denny’s. Also, many people go straight to Denny’s to sober up after clubbing. If the job market is stable — which it is right now — the company benefits from being one of few eateries open at odd hours. In turn, that supports DENN stock.

Also, we should see a record number of people hitting the road this summer. Invariably, that involves families stopping over to grab a bite to eat. And because we might see an unusually high uptick this year, that should play into higher valuations for DENN stock.

Lastly, Denny’s is cheap. So if we do have a downturn in the economy, DENN stock might avoid the brunt of the damage.

Darden Restaurants (DRI)

7 Restaurant Stocks to Put on Your Plate

A powerhouse name among restaurant stocks, Darden Restaurants (NYSE:DRI) is enjoying a strong first half of the year. Since the beginning of January, DRI stock is up more than 25%. Moreover, some of the same conditions that will likely benefit Denny’s should also drive up Darden Restaurants.

For one thing, Darden levers some of the most coveted names in sit-down restaurants. Not only that, its coverage is one of the most diverse when compared to other restaurant stocks. For comfort food, Darden owns the Olive Garden and Longhorn Steakhouse brands. But they also address consumers with more sophisticated tastes with brands like Seasons 52. This should help bring in the goods for DRI stock in terms of revenue and profitability.

In fact, that’s what we’re seeing. Over the past few years, revenue has strongly moved higher. But earnings have also increased accordingly, which bolsters the case for DRI stock. In addition, because Darden offers multiple brands across the price spectrum, they’ll enjoy the benefits of the aforementioned travel bump.

Dunkin’ Brands (DNKN)

7 Restaurant Stocks to Put on Your Plate

Dunkin’ Brands (NASDAQ:DNKN) is another name among restaurant stocks that’s killing it so far this year. Since January’s opening price, DNKN stock is up 28%. Undoubtedly, a major reason why is its coffee: worker bees love its coffee and Dunkin’ Brands dishes up some delectable cups.

Furthermore, the commodities market have had their say in DNKN stock. Although coffee prices have recently spiked up, they are still deflated relative to prior years’ average prices. Theoretically, this should help Dunkin’ in terms of its bottom line.

Of course, no company can depend solely on fortuitous circumstances. What investors in restaurant stocks will key in on is management’s push to attract millennials. To this end, they’ve embraced popular apps like Apple’s (NASDAQ:AAPL) Pay. Dunkin’ has also advantaged the consumer-tech firm’s iMessage platform to further engage with their young clientele.

It’s a move that makes perfect sense for DNKN stock. Over the next several years, millennials will represent the largest workforce in the U.S. They’ll need lots of coffee and serving their needs is the most logical action they can take.

Jack in the Box (JACK)

7 Restaurant Stocks to Put on Your Plate

I’m going to cut straight to the chase. Out of the restaurant stocks specializing in fast food, Jack in the Box (NASDAQ:JACK) is probably the riskiest. Back in December, management announced a “strategic review” of its financing options. That normally entails a sale of the company. However, no one is buying, which raises eyebrows for JACK stock.

Another problem is infighting between franchisees and corporate leadership. The former is concerned that the latter is merely focusing on nearer-term goals, like the JACK stock price. They argue that the organization should consider longer-term goals, especially to address the needs of millennial consumers.

Although I don’t have skin in this game, I find myself agreeing with the franchisees. As a San Diego-based company, Jack in the Box has a strong presence on the west coast. That’s ideal since this region is always high in demand. Moreover, Jack also has several locations in Texas, which is experiencing an influx of people.

That might bother the locals. However, if you’re thinking about speculating on JACK stock, the population shift brings up an interesting argument.

Dave & Buster’s Entertainment (PLAY)

7 Restaurant Stocks to Put on Your Plate

Source: Shutterstock

Right now, the absolute riskiest name among major restaurant stocks is Dave & Buster’s Entertainment (NASDAQ:PLAY). Unfortunately, extremely volatility visited PLAY stock after the underlying company posted disappointing Q1 earnings results. It suffered a decline in comparable-store sales, and management adjusted down full-year guidance.

However, it wasn’t all bad news. Dave & Buster’s brought in sales of $363.6 million, up 9.5% from the year-ago quarter. Additionally, management opened seven new stores, up one from Q1 2018. That, however, was not enough to spare PLAY stock a huge double-digit loss.

Still, I think the markets’ response toward PLAY stock is greatly exaggerated. For one thing, Dave & Buster’s provides a natural outlet to soak up demand that’s leaving professional sports leagues.

My argument is that people still need physical entertainment venues: Dave & Buster’s has an opportunity to capitalize on this dynamic if it plays its marketing cards right.

Chanticleer Holdings (BURG)

7 Restaurant Stocks to Put on Your Plate

Source: Shutterstock

Before you think about taking a gamble on Chanticleer Holdings (NASDAQ:BURG), you should know that it’s an extremely speculative name. With BURG stock trading hands at just above $0.50, this isn’t something that you bank your retirement savings on. And although its financials are improving somewhat, it’s still a rough picture.

So why mention Chanticleer? Simply put, the company has some attractive brands. On one end, Chanticleer covers the decadence angle with its popular Hooters restaurants. Chanticleer is also well known (or perhaps notorious) for American Burger Co’s “Roadstar.” That’s four cheeseburgers in one.

But on the other end, the holding company owns brands like Little Big Burger, Just Fresh and BGR. These names definitely cater to millennials and health-conscious consumers. Thus, BURG stock has something for everyone.

Historically, this widespread approach hasn’t helped BURG stock. However, shares have ticked up since early June. Again, this is a big risk: only buy it with gambling money that you can afford to lose.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2019/09/restaurant-stocks-to-put-on-your-plate/.

©2024 InvestorPlace Media, LLC