The restaurant sector, including the fast food outlets, continues to reward investors with a good investment opportunity over the past years. The advance in the eateries has been somewhat overdone, as the stock market appears to be willing to price much higher on these stocks.
McDonald’s No Longer the Top Investment?
McDonalds Corporation (NYSE/MCD) was previously the top investment opportunity in the restaurant sector. Over a decade ago, the company recognized the market trend to healthier meals. In response, McDonald’s undertook a major transformation to its menu offering by expanding its menu to healthier choices, such as wraps and salads, to complement its hamburger and fries beginnings.
Chart courtesy of www.StockCharts.com
Yet McDonald’s is no longer the go-to restaurant stock, as the sector has seen a massive influx of new players offering a wide assortment of meals, from Mexican to Asian, to sandwiches and family sit-down meals. The market is extremely competitive. McDonald’s may still be an aggressive investment opportunity for some, but the company will need to turn things around in order to regain its previous glory.
The catalyst for the rise in restaurant stocks has been the economic renewal, jobs creation, and rising home prices. That means many more restaurants than just McDonald’s are seeing profits—and there are three that just might be a better investment opportunity than McDonald’s.
Chipotle Mexican Grill, Inc.
One of the hottest restaurant stocks at this time is Chipotle Mexican Grill, Inc. (NYSE/CMG), which has a market cap of $21.0 billion. In the past, I have written about how I have been bullish on a stock like this one as a potential investment … Read More
Quick-service (aka fast food) restaurants may want to herd customers in and out as swiftly as possible, but when it comes to their numbers, it’s worth slowing down a little.
For example, on any given day, the restaurant industry generates around $1.8 billion in sales. In July 2013, industry sales came in at $45.83 billion, a 17.7% increase over the $38.93 billion recorded in July 2010. When it comes to pulling your weight, few do it like fast food employees: in 2011, sales per full-time-equivalent (non-supervisory) employee were a jaw-dropping $83,947. For investors, restaurant stocks can make a lot of money. (Sources: “America Shops: U.S. Retail and Food Service Sales,” The Wall Street Journal, August 13, 2013; “2013 Restaurant Industry Pocket Factbook,” Restaurant.org, 2013.)
It takes a lot of people to generate these daily sales for restaurant stocks; in fact, it takes more than 13 million people, or nearly 10% of the U.S. workforce. Over the next decade, the restaurant industry is expected to add a further 1.3 million jobs, reaching 14.4 million by 2023.
Perhaps not surprisingly, restaurant industry jobs growth has, for the past 13 consecutive years (2000 to 2013) and counting, outpaced the overall U.S. economy. On the whole, restaurants and restaurant stocks are a good barometer of the health of the economy. If restaurant stocks are reporting solid growth, it means Americans have more disposable income.
While a handful of restaurant stocks like McDonalds Corporation (NYSE/MCD), Burger King Worldwide Inc. (NYSE/BKW), and The Wendy’s Company (NASDAQ/WEN) may grab most of the attention, there are a large number of other restaurant stocks out there, some well known … Read More