You know you've got food price inflation when chomping on a McDonald's ( MCD) burger you discover the meal also took a bite out of your wallet.
Not only have we seen costs rising at our beloved Golden Arches, but food delivery has become a big premium cost, too. Ubereats ( UBER) , DoorDash ( DASH) and the rest seem to be making a pretty penny delivering food and upping costs to hungry consumers.
But it is the restaurant chains that seem to be in a sweet spot and ready to cash in as inflation takes a turn downward. The big names -- McDonald's, Yum Brands ( YUM) , Chipotle ( CMG) , Jack in the Box ( JACK) , Restaurant Brands International Inc.
( QSR) and Wendy's ( WEN) are positioned well for their recent price hikes to stick, while costs come tumbling down.
( QSR) and Wendy's ( WEN) are positioned well for their recent price hikes to stick, while costs come tumbling down.
Now, we don't believe those prices will skyrocket, but believe us when we say there will be a nice margin cushion provided by the wide spread of sales and costs. The demand for food and casual dining remains robust; the data from Mastercard Pulse and other sources bear this out. The Dow Jones U.S. Restaurants and Bar Index (DJUSRU) remains elevated and more than 20% higher than the recent October lows. That is good relative strength.
What are some of the better performers in this specific-restaurant group, and on which table might you put some money? Top of the list would be Action Alerts PLUS investing club portfolio-holding Chipotle, which is up sharply on the year. This stock has remained strong through the pandemic and has shown solid relative strength. Another name would be Yum! Brands, the owner of Taco Bell, KFC and Pizza Hut. This stock has moved in lockstep with the DJUSRU, with strong volume trends and positive money flows.
Lastly we have QSR, which has Burger King, Tim Hortons, Popeyes and Firehouse Subs. These are great franchises that offer great value to the customer. The stock has exploded higher since June, up more than 50% over that seven-month timeframe. These three would be terrific buys here or on pullback, but a few "also rans" include JACK, Starbucks ( SBUX) , and WEN. People need to eat and they like to go out, this is the time to be looking at the fast food group.
(CMG is among the holding in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells stocks? Learn more now.)
