There’s a growing appetite for going out to grab a bite to eat again, and there are some restaurant stocks that are ready for more business. It was certainly there during the lockdown of most restaurants, and that fueled delivery services and other creative ways to manage demand.
But now, pickup and delivery orders, like work-from-home policies, will once again go through a new transformation. Where the big chains saw a drag on earnings due to the multiplier effect of having a large amount of exposure in many states during the pandemic, now that same multiplier effect will be working in their favor.
Also, having survived with skeleton crews, these big restaurant chains have also been able to adopt technologies that will help leverage productivity and keep costs as low as possible, at least early on.
Many of the seven restaurant stocks worth a visit here have done well during the pandemic. And now that it’s almost over, they should really gain traction.
Biglari Holdings (NYSE:BH)
Chipotle Mexican Grill (NYSE:CMG)
Darden Restaurants (NYSE:DRI)
Brinker International (NYSE:EAT)
Jack in the Box (NASDAQ:JACK)
Shake Shack (NYSE:SHAK)
Biglari Holdings (BH)
Certainly one of the more unique corporate structures out there, BH.A owns Steak ‘n Shake and Western Sizzlin brands. But it also owns a commercial truck insurance company and some shallow water natural gas and oil wells in the Gulf of Mexico.
This isn’t a big company, with a market capitalization of $416 million, and it’s fairly young, launching in 2017. But it’s smart at picking up well-known brands on the cheap and reviving them for a new marketplace.
And it’s certainly not in the mold of most restaurant stocks, in case you’re looking for some diverse assets or an interesting story for the golf course.
The stock is up 20% year-to-date (YTD), and that momentum is increasing.
Before Austin, Texas, got cool, Chuy’s was already a go-to spot. Launched in 1982, CHUY is a true Tex-Mex chain established in the heartland of its cuisine, which can’t be said of many restaurant stocks.
Today it has over 90 restaurants in 19 states. The pandemic was a challenge for this focused brand, but it has remained strong given the headwinds. And comp sales (the revenue generated from established stores in one quarter to another) are improving, which is good news.
The stock is already anticipating good things; it’s up 70% YTD. But that doesn’t mean its run is over. There’s a very good chance its customer base is looking forward to getting back into their local Chuy’s for some good times with friends and family again.
Chipotle Mexican Grill (CMG)
Anyone who lives in the U.S. has likely heard of (if not eaten at) a Chipotle. And today, it’s one of the most formidable restaurant stocks in the market. And that’s just not about size, but its quality, customer engagement, adoption of technology, and most important, its ability to customize orders for every customer.
CMG has around 2,750 restaurants in the U.S., as well as in the U.K., Germany, France, and Canada. When the pandemic hit, CMG was already deep into automating and expediting its food services with pre-orders, delivery, drive-thrus, etc.
The tech also helped when crews had to downsize since it could leverage its workers and stage them more efficiently. CMG was also one of those restaurant stocks that investors look to as a port in the storm, knowing it would be up to the challenges the pandemic brought with it.
Today, the stock is consolidating and is only up about 13% YTD, which is a good thing for new investors. Earnings will certainly come charging back this year.
Darden Restaurants (DRI)
If you’re looking for restaurant stock that has the entire range of cuisine and price points covered, then look no further than DRI. While it spun off its legendary Red Lobster chain years ago, it still has the iconic Olive Garden and Longhorn Steakhouse chains in that sector of the market. And moving upscale, it operates steakhouses like The Capital Grille and Eddie V’s. It also operates other niche brands like Seasons 52, Cheddar’s Scratch Kitchen, Bahama Breeze and Yard House.
Where many restaurant stocks drill down into a cuisine like CMG, DRI prefers to expand its operations and then put them in strategic markets to maximize their effectiveness. And this formula has proven itself time and again since its founding in 1938.
The pandemic has certainly hit its higher end dining choices as well as its mid-priced niche brands, but DRI is on its way back, up about 21% YTD. This is a good time to sink your teeth into this one.
Brinker International (EAT)
Like DRI, the name doesn’t mean much for EAT. It puts all the focus on its brands, Chili’s Grill and Bar and Maggiano’s Little Italy.
And its $3 billion market cap certainly indicates that it’s a good sized player in this sector. EAT has over 1,200 Chili’s in the U.S. and another 377 internationally. The international restaurants are spread across Asia, Europe, the Middle East, Latin America and Africa. Wherever Americans tend to go, a Chili’s is likely there to greet them.
Launched in 1975, EAT has been very good at keeping its pulse on the changing food habits it customers. In the U.S., it has transitioned from quantity focused value to quality focused value menu and has done a very good job integrating technology into its operations to help it boost take-out and delivery orders during the pandemic.
EAT stock is up 22% YTD and it’s pretty expensive here but it’s a play on the world getting back to normal and restaurants opening up once again.
Jack in the Box (JACK)
Of all the restaurant stocks here, Jack in the Box is the only one that’s based on a franchise model. In 2020, it has nearly 2,100 franchisee-owned restaurants and 144 company-owned restaurants spread over 21 states. And there’s continued growth on the franchise side of the business, which is very good for JACK.
The chain started in California and over the years franchisees have launched operations across the West, the Rockies, Guam, and even to the Carolinas.
The franchise model allows JACK to function differently than most of the other restaurants here, but it’s an effective model in the kind of fast food sector where it competes with larger global and national brands. Its model also means its stores were ready for the pandemic given established drive-thru windows and efficient food prep and staffing.
The stock is up 23% YTD and is trading at a remarkably low P/E given its quarterly numbers continue to climb.
Shake Shack (SHAK)
Danny Meyer’s gold mine started in a New York City park in a defunct snack bar in 2004. Now it’s a fast-casual phenom, with 275 restaurants, with over half company-run stores.
And even with the pandemic shuttering all its stores at one point or another, it still has plans to open 450 in coming years. The operation is interesting because while its in the fast casual group, it’s also offering upscale quality products and has established a unique brand in a very competitive space.
SHAK has been under pressure during 2020, since its dine-in service was at the core of its operations and take out windows can’t be retrofitted in a lot of locations. However, the brand is powerful and a PPP loan has helped keep it in the game.
Now that things are returning to normal, SHAK is gaining interest again, up 34% YTD. Just remember this stock has a history of trading at a premium, but it also has a lot of fans.
On the date of publication, Louis Navellier had a long position in DRI. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.