There are two advantages to restaurant stocks in good times.
The first is that people have more money to spend, so going out to eat isn’t just reserved for special occasions. When times are tight, though, people tend to forego the “luxury” of dining out and buy nicer cuts of meat or brand-name goods at the grocery store and cook at home.
Second, it’s not about the big splurge. It’s about grabbing something on the way home for the family rather than slapping together a meal when you get home. And, the fact that many places that weren’t known for healthy eating — like fast food joints — are now building quality-focused menus with healthier options.
Overall, fast casual dining has become a “thing,” and it has changed what people expect from fast food. It has re-imagined how we can eat well and quickly, and even customize our meals for our personal tastes.
Furthermore, delivery options have also changed the landscape — but that’s for another time.
So, with that said, let’s dive in and focus on these seven delicious restaurant stocks to buy.
Restaurant Stocks to Buy: Chipotle (CMG)
Chipotle Mexican Grill (NYSE:CMG) is one of the pioneers of fast casual dining. It is also one of the pioneers of curating your meal as it’s prepared.
People love to pick each item that gets rolled into their burrito or put into a bowl. And CMG has had a reputation for buying quality products, like sustainable meat from smaller producers.
Recently, it has introduced menu items to go along with the newest diet trends in mind and with sensitivity to gluten and other allergies.
And if you have ever seen how big the line can get during popular meal times, CMG has also begun using pick-up service — using an app you can put on your phone. They also deliver using various app-based delivery companies.
Additionally, Chipotle turned in stellar earnings in 2019. All these reasons — and no more issues with tainted lettuce — have helped power CMG stock back to the big time.
Up 54% in the past year, it has a bright future ahead and is a staple of my Growth Investor recommendations.
Wingstop (NASDAQ:WING) is another story of big growth from a niche market. Like CMG stepping into the game with Mexican fare that took off around the country, WING started about the same time by selling buffalo-style chicken wings in Garland, Texas.
Today, it has over 1,350 locations worldwide — including in Mexico, Colombia, Panama, Singapore, Indonesia, Malaysia, United Arab Emirates, the U.K. and the U.S.
Unlike CMG, though, WING is a franchise business. That means the company licenses its name to people who want to start their own Wingstop. Then, they brand it and operate it according to rules set down by the company.
Obviously, the world loves a good chicken wing. And that’s pretty much what WING sells. However, it doesn’t try to please every palate.
So if you want wings and sides, that’s what you get — and it’s working. The stock is up 51% in the past 12 months, and it continues to expand.
Shake Shack (SHAK)
Shake Shack (NYSE:SHAK) is the newest phenomenon to hit fast casual in a while. New York City restauranteur Danny Meyer caught a tiger by the tail when he opened his first Shake Shack in a NYC park with a hot dog cart in 2001.
It was the hot dog stand and burger joint reimagined. It took a high-end view of the simple foods and grew them to another level. And now, there are 168 Shake Shacks in the U.S. and 86 around the rest of the world.
That said, it can be argued the Meyer started the new burger movement that’s currently happening in the U.S. A decade ago, paying $12 or more for a hamburger was a crazy concept. But now, in every city there’s at least one or two burger joints with local or humanely raised beef, free range chickens and veggie burgers. And, great fries.
With that, you have Shake Shack to thank — or curse.
The stock is up 41% in the past year, and is a “Buy” in the stock-rating system I use to find great Growth Investor plays. So while its expensive, there’s plenty of growth out there for this elegantly simple concept; Especially in the U.S as the economy continues to expand.
Papa John’s (PZZA)
Papa John’s International (NASDAQ:PZZA) has been on quite a ride since mid-2017, when the founder John Schnatter was ousted as CEO. He had been caught out making inappropriate racial comments more than once, and the board had finally had enough as sales dropped and investors walked.
With that, PZZA has been working hard to get out of his shadow. But, they have been making big changes internally as well as rebranding their organization to consumers.
In turn, the stock is up 59% in the past year, which shows that progress is underway. And this should be a good pizza year, as deliveries usually spike in an election year when people hunker down for debates or sporting events like the 2020 Summer Olympic Games.
Overall, having made headway before the Super Bowl should help the current quarter’s numbers as well. Most important, now that the cloud has lifted, its franchise operations both domestically and globally should get back on track soon too.
McDonald’s Corp (NYSE:MCD) has a lot going for it.
Granted, for a few years it was touch and go — having waited a bit too long to upgrade its offerings with new choices for a younger demographic.
Even simply deciding to serve breakfast all day was a game changer for this behemoth. And it’s size means its impact on the agriculture industry is huge.
Also, when it announced that it was moving to cage free eggs, that changed the egg industry. In some ways, it has more power over some agriculture sectors than a national government.
Furthermore, on Wall Street, MCD is a blue-chip stock that’s also a dividend aristocrat. That means it has raised its dividend every year for more than 25 years in a row. In MCD’s case, it’s 43 years. That’s a key criterion for my Elite Dividend Payers buy list at Growth Investor.
Sitting at a 2.3% dividend and growth of 18% last year, this is one of the best long-term growth stories in the industry.
Wendy’s Inc (NASDAQ:WEN) is tiny compared to MCD, which has a market capitalization of $162.4 billion. Meanwhile, Wendy’s market cap is $5.2 billion.
However, WEN is a competitor all the same. In the old days, when it was looking where it wanted to place restaurants, it didn’t want to spend the massive money that McDonald’s did on market research. So, it would look to see where a McDonald’s went in, and then find a spot as close to it as possible.
That kind of pragmatism is how it has done so well over the years, and managed to keep its loyal base as well as expand that base.
Furthermore, it will soon launch its own breakfast service. It tried this years back and it didn’t work well. But, they’re going back in and there’s some good buzz about it.
The point is, WEN is always looking to keep up with the trends. And it can do that a bit more easily than MCD because it’s smaller and has remained nimble.
Overall, the stock is up 33% in the past year and delivers a solid 2% dividend. And it seems like a great option for investors looking to add restaurant stocks to their portfolio.
Aramark (NYSE:ARMK) is a bit of an oddity in this collection of restaurant stocks, since it’s a broader, integrated food service company.
It doesn’t do restaurant per se. But it offers institutional food services to industry, governments, universities, correctional facilities, state parks, sports arenas and others.
But, it also does supply food to restaurants — and has large uniform and clothing business as well. With that, this is a much more diversified company and operates on a different scale than most of the food service firms here.
However, it’s an interesting choice because it is the backbone of the food service industry. And it is also starting to build out properties and lease them to restaurants. This is just another avenue into the restaurant business through the back door, and helps build the “moat” around its business that’s a hallmark of my Growth Investor recommendations.
The point is, ARMK has been around since 1959, has global operations and continues to find new opportunities that fit within its focus. The stock is up 30% in the past year and offers a 1% dividend.
That said, it flies a bit under the radar. But it knows that if it can help keep the front doors open for customers, it will always have growing deliveries to the back doors.
And I’ve Got More Where That Came From
Great restaurant stocks like the ones we discussed just now are rare. It can be a tough business in terms of profit margins. On the other hand, the scalability of a strong technology business is an excellent source of growth investments.
In that vein, the 5G wireless infrastructure buildout is an incredible opportunity for investors right now.
Within two years, most cell phones will be 5G enabled and be able to wirelessly handle television streaming. With 5G, we’ll have cable modem speeds on any device; no need to plug in. That’s a big deal for rural areas … the very same areas that are also key to President Donald Trump’s reelection. So, by pushing 5G over the goal line, Trump will deliver a big win for his base — and strike a blow against Chinese rivals like Huawei Technologies.
But, in the big picture, 5G is about much more than trade wars and faster downloads. Because 5G is 100 times faster than 4G, it’ll allow your internet devices to work in real time. That advancement is a game changer for tech companies.
With the 5G infrastructure market set to grow at an annual rate of 67% over the next 10 years, the entire market will go from $780 million to nearly $48 billion. This buildout is where I see opportunity with 5G stocks now.
Cable companies can do their best to fight back with fiber optics … but they can’t compete with the convenience of a smartphone, once it’s got ultra-fast 5G. That’s how my 5G infrastructure play will capture more market share from the broadband cable companies.
The stock I’m targeting is enjoying an influx of big money on Wall Street, and it has strong fundamentals, too — making it an “A”-rated “Strong Buy” in my Portfolio Grader system.
When you do, you’ll see how to claim a free copy of my new investment report, The Netflix of 5G, which has full details on this company — and what makes it such a great buy now.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In one recent feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.