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Proprietary Data Insights Top Restaurant Stock Searches This Month
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Who Is The King Of Fast Food? |
We last looked at fast food in September. It’s something we do from time to time because — admit it or not — everybody loves themselves a little fast food. And fast food chains tend to be household names. However, sometimes the stocks aren’t, particularly when a large group owns several brands. Plus, we usually broadly include Starbucks (SBUX) in this category. You know The Juice loves Starbucks. Our rationale for that love helps inform what we said about the fast food space a couple of months ago: While it might be fun to say you own 100 shares of Jack in the Box, we don’t see much point in it. Not in a stock market with a zillion other options. We mean the stock’s not just down 14% over the last year, it’s down by about the same amount over the last five years. Why bother when you can enjoy McDonald’s (up 68% over five years), Starbucks (also up 68%), Chipotle (up 315%!) and Domino’s (up 34%). In these spaces, go with the leaders. Plain and simple. How have those leaders fared over the last month?
Not too bad. All four stocks outpace the S&P 500 during that time frame by a wide margin. As for Jack In The Box (JACK), granted it’s up nearly 9% over the last month. However, it clawed its way back from roughly 26% worth of downside over the last six months. Over the last six months, MCD was down 8%, SBUX was flat and CMG and DPZ posted respective gains of 5.5% and 25%. This is part of our point: There’s too much volatility and not enough long-term performance and stability in these relatively random names. To that end … In another fast food-focused Juice, we wrote: While it has had an impressive run in 2023, we just don’t like Shake Shack – or other smaller fast food/QSR chains – in a world dominated by McDonald’s and Chipotle. While the latter dabbles here and there in related spaces, when you buy these stocks you’re pretty much buying McDonald’s and Chipotle straight away. Because investors will judge MCD and CMG on the basis of how McDonald’s and Chipotle perform. And, over the long-term, we’re confident to say they’ll both be strong and steady. Just as we don’t like smaller players, we’re not fans of big fast food conglomerates with multiple brands under their umbrellas. If you own Restaurant Brands International (QSR), you’re buying Burger King, Tim Hortons (eh!), Popeyes and Firehouse Subs. If you buy Yum! Brands (YUM), you’re buying KFC, Taco Bell, Pizza Hut, The Habit and more. There’s just too much room for error across so many different brands. How have Shake Shack (SHAK) and Restaurant Brands International (QSR) done in the last 30 days?
So, not bad. You would have made some money if you short-term traded these names. We’re not ashamed to admit this. However, The Juice tends to come from the perspective of the long-term investor. And, without exception, the five-year and maxed-out charts of JACK, SHAK and QSR looked like nausea-inducing roller coaster rides, whereas MCD, SBUX, CMG and DPZ look — more like — straight lines up. And, here again, part of that is because with a stock like QSR, your fate could hinge on one brand performing poorly. For example, QSR’s Popeye’s Chicken is crushing it. Don’t look now, but earlier this year it became the #2 chicken chain behind #1 Chick-fil-A, surpassing now #3 KFC, owned by Yum! Brands (YUM). Popeye’s actually managed to increase year-over-year monthly visits in September by 0.6% compared to a 1.6% decline among chicken chains and a 3.3% drop across all fast food and quick service outlets. Meanwhile, Burger King continues to struggle with inconsistent foot traffic and a same-store sales growth miss in the most recent third quarter. Definitely not the king of fast food. Particularly when you consider that McDonald’s posted 8.8% global same-store sales growth in Q3, beating Wall Street estimates by a full percentage point. In the U.S., same-store sales were up 8.1%. MCD also beat on earnings and revenue. The Bottom Line: So, yeah, you can always make investing more complicated than it needs to be. Like we said in a recent Juice worth going back to right now, stick with cream of the crop household names. We freaking love Tim Horton’s — another QSR brand — but just because we love it doesn’t mean we should buy its parent company’s stock out of some show of loyalty. That’s risky. Take a coffee black, a dozen Timbits and call it day. Invest in the leaders individually or as part of a solid and straightforward ETF investing approach. |
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