Recently, in the U.S. economy, we have been seeing decent jobs numbers, cheaper gas prices, and appreciating wealth in the housing market. The end result is consumers with more money to spend on things that make them happy, such as dining and travel. And I can see an investment opportunity opening up in some restaurant stocks.
When people are confident with their financial situation, they tend to spend more freely.
Take a look at the chart of the Dow Jones US Restaurants & Bars Index, which has been edging higher and appears to be breaking out following a sideways channel. I feel there’s a continued investment opportunity in the sector, as long as the economic growth holds and people continue to feel confident.
Chart courtesy of www.StockCharts.com
Whether it is fast food, family dining, or higher-end dining, the restaurant business is all about marketing food that appeals to diners and meets their needs.
The Long-Term Investment Opportunity: McDonald’s
Over the last couple of years, one of these restaurant stocks was McDonalds Corporation (NYSE/MCD). The seller of the “Big Mac” with the famous golden arches had its issues years ago when diners were caught up in the move to healthier eating. McDonald’s revised its menu and added healthier choices, which resulted in the stock surging back to the top of the restaurant sector.
While McDonald’s remains a long-term investment opportunity, the company has been facing competition from new entrants into the fast food market that offer alternatives.
The Rapidly Expanding Investment: Chipotle
An investment opportunity in restaurant stocks over the past few years has been Chipotle Mexican Grill, Inc. (NYSE/CMG), which … Read More
Love them or hate them, fast food restaurants are an American institution. That’s not a huge surprise when you consider the hamburger was first created here around 1900 and the first fast food restaurant, A&W, opened its doors in 1919. For almost 100 years, our taste buds have been both regaled and assaulted by any number of fast food restaurants, now affectionately called “quick service.”
From its humble beginnings, the restaurant industry has become an economic juggernaut, generating around $1.8 billion in daily sales. In 2013 alone, restaurant industry sales are expected to generate $660.5 billion; that’s equal to roughly four percent of the U.S. gross domestic product. (Source: “2013 Restaurant Industry Pocket Factbook,” Restaurant.org, last accessed November 8, 2013.)
While the U.S. restaurant and quick service industry took a hit immediately following the Great Recession, the industry has bounced back. During the second quarter, trips to quick service restaurants—which account for 78% of industry traffic—were up by one percent, while consumer spending increased by three percent. (Source: “U.S. Restaurant Traffic Increases Modestly and Average Check Growth Drives Spending Gains in Q2, Reports NPD,” NPD Group web site, September 17, 2013.)
More specifically, traffic to fast casual restaurants, which is included under the quick service banner, increased by eight percent in the second quarter. After several consecutive quarters of decline, casual dining held steady. Things were not so good for midscale/family dining restaurants, however, which experienced a two-percent decline in traffic.
Even though the U.S. retail and food services sales results for the third quarter have not been released yet, the U.S. Census Bureau announced recently that advance estimates of … Read More