An appetite for profits.
Whether you order in, get it to go or simply peruse the menu, buying restaurant stock may represent the truest case of putting your money where your mouth is — or following your gut. Investment leader Warren Buffett bought Dairy Queen in 1997 for $585 million because he loved the ice cream (a cherry sundae, to be precise, with lots of nuts). It didn’t hurt that DQ made a nice match for his holdings in McDonald’s Corp. (NYSE: MCD), which have since risen 516 percent, making for the ideal all-you-can-eat Buffett buffet. Here are eight stocks from the restaurant and dining sector as they stand in summer 2017.
DineEquity (DIN)
You could say this chain, home to IHOP, is plagued by a barrel of bad apples, as in Applebee’s. Though aimed at a younger crowd, Applebee’s has suffered from the indifference of millennials who’d rather go urban hip than suburban slick. And so DineEquity is on the ropes — down by almost half since this time last year and trading at about $38 per share. Just last week, DIN announced it would close up to 135 Applebee’s restaurants.
Jack in the Box (JACK)
San Diego-based JACK has a hit in its Mexican Qdoba chain. “JACK needs to separate its older Jack in the Box concept from its newer, faster growing Qdoba,” says Scott Rothbort, a business professor at Seton Hall University and president and founder of LakeView Asset Management. New quarterly results showed earnings of $37.1 million, up 20-plus percent over last year. Next on JACK’s menu? “I envision a spinoff or issuance of a tracking stock, as was quite popular in the 1990s.”
Darden Restaurants (DRI)
Investor activism peaked in 2014 with the infamous Breadstickgate. In a 300-slide smackdown, Starboard Value CEO Jeffrey Smith blasted Darden for, among other things, giving out too many free breadsticks at its Olive Garden restaurants. Starboard threw the Darden board overboard, and the casual dining chain has since seen its stock soar 60 percent. Besides Olive Garden, the Orlando-based DRI also owns LongHorn Steakhouse, Bahama Breeze and five other dining concepts — none of which serve copious comp breadsticks.
Chipotle Mexican Grill (CMG)
Chipotle — a onetime hot pepper in the McDonald’s lineup — has been hit with an extra dose of sour cream. “Qdoba is the anti-Chipotle Mexican Grill,” says Rothbort, pointing to the perception among consumers that Qdoba now ranks a clear cut above in the quality department. And since May, returns have gone greasy spoon. Chipotle stock is down a third to $328 per share and suffering the steady kind of slide that gives investors sustained heartburn.
McDonald’s Corp. (MCD)
Following a McFunk, Ronald McDonald has strapped on his red size 21 shoes for a long, healthy run. British CEO Steve Easterbrook, who took over in 2015, has applied bulldog tenacity to a McDonald’s turnaround, putting premium items on a revitalized menu that still retains beloved Big Macs at its heart. In 2017, the golden arches have jumped 30 percent to $157 dollars per share. For investors who measure their Happy Meals in dollars, that means billions and billions served.
Starbucks Corp. (SBUX)
Today, up to 3 in 4 American Starbucks compete with — each other. Analyst Andrew Strelzik of BMO Harris Capital Markets downgraded SBUX recently because a glut of new stores apparently comes “at the expense of existing store traffic.” And while Starbucks’ coffee prices seem to always rise, it’s not so with SBUX stock, off 4 percent this past year. All that has Starbucks looking to China, where coffee is now a go-to brew among that nation’s upwardly mobile.
Shake Shack (SHAK)
It’s the burger joint equivalent of yanking meat off the grill too soon. Though it has only 130-plus locations, SHAK has been public since January 2015 and returns haven’t satisfied investor appetite. Since a giddy peak in May 2015, SHAK has since plunged to a dismal $32 per share. Given the eatery’s high prices (based on its retro-hipster diner concept), one share of SKAK is less expensive than two orders of burgers, shakes and fries.
Cracker Barrel Old Country Store (CBRL)
Tennessee-based Cracker Barrel is as southern as pecan pie — yet for shareholders, the tin is full of crumbs. CBRL has been flat for more than two years at $152 per share, after rocketing more than 1,200 percent the previous six-and-a-half years. The doldrums hinge on the chain’s dependence on retail gift shops that sell all manner of down-home tchotchkes. Slumping sales there have dragged down the performance of CBRL’s attached roadside restaurants.
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8 Ways to Satisfy a Craving for Restaurant Stocks originally appeared on usnews.com
