I haven't been a fan of casual dining stocks as of late. I even held some bearish call spreads in Buffalo Wild Wings (BWLD) , but the stock has faded enough to provide exit opportunities over the last few days.
Yesterday, I strolled into a Chipotle Mexican Grill (CMG) with my better half. The place was packed for the first time in a long time. It wasn't just CMG, though. Most of the area's restaurants flashed a different picture than what I witnessed during the summer.
We didn't have time to stay as the school year offers a vastly different profile of evening than what we experience during the summer. Last night was packed with homework, projects and softball practice. It left little time for dinner and we wound up just grabbing something while we were out ... exactly like the night before. As I looked around the different places, I saw many similar faces. Too busy to cook and clean up afterwards. Too stressed out to concentrate or even plan a meal. Yes, school is back and sports/activities are in high gear. Cue casual dining to the rescue.
We're starting to see the turn in the stocks as well. Granted, some have less to turn than others. If you look at a name such as Jack in the Box (JACK) , you'll find a stock not far off its highs and trading well above its 50-day simple moving average (SMA). JACK isn't alone. If you were to pull charts such as Domino's (DPZ) or Dunkin' Brands (DNKN) , you'll find similar views. These are the strongest of the strong at the moment.
I still like McDonald's (MCD) here as a core holding. A solid 3% yield and a stock with lots of room to run higher and a clear stop at $112.50. Bulls appear to be getting past the summer doldrums and appear to be testing the 50-day SMA. That looks like the last big area of resistance until we are back in the $120s. There may be a slight pause around $119, but as folks continue their search for yield, I expect them to return to MCD. Breakfast all day and a yield all year.
For those aspiring to true casual dining over fast food, Darden Restaurants (DRI) looks very interesting over $63. This stock has been consolidating for two months and should see a quick 5%-plus boost should we close over $63. Even better, we know a close under $61.50 should put us on the sidelines. The daily chart also shows us how the 10-day SMA and 50-day SMA have come together and both sit in the middle of the current ascending triangle pattern. This is additional support for the bulls. I wouldn't trigger early here, although I would consider a long volatility play right here as I think we'll see this stock higher or low by at least $5 within the next month.
The first day of fall is upon us, but the strength in the dining sector only appears to be rising.