• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Homage to Restaurants and Resilient Restaurant Stocks

Surprisingly, 2020 has turned out to be decent year for restaurant stocks.
By JONATHAN HELLER
Dec 11, 2020 | 11:17 AM EST
Stocks quotes in this article: CMG, WING, NDLS, MCD, YUM, DPZ, DRI, RRGB, PLAY, KRUS

Ending the year with a whimper, it looks like Friday is the last time in 2020 that citizens of my state (Pennsylvania) will be able to enjoy indoor dining. A three-week ban goes into effect on Saturday, Dec. 12 at 12:01 a.m. on restaurants, gyms, and entertainment businesses, and also limits retail to 50% of capacity.

Whether this will help slow the pandemic remains to be seen, but it appears to be yet another power move on the part of our governor, and is a sad way to end the year, especially for the those who own and work in the restaurants and other affected businesses.

So today I pay homage to the restaurant industry. I wish I could write about all of our favorite mom and pop places, the ones that folks have been trying to help stay afloat by frequently ordering take out and tipping generously, but we have to focus on what's happening in the publicly traded space.

2020 has actually turned out to be decent for restaurant stocks. A basket of 40 or so that I follow are up an average of about 7.5% for the year. While the S&P 500 (up 15.5%), Russell 2000 (up 16.4%) and and Russell Microcap (up 18.5%) all performed significantly better, it is surprising that many restaurant names are even in positive return territory for the year under the circumstances.

On a total return basis, the best performer in 2020, is Chipotle Mexican Grill (CMG) (up 57.4%), which remained profitable (just barely in the second quarter) throughout the year, followed by Wingstop (WING) (up 57.1%), and Noodles (NDLS) (up 47%). NDLS, which has had its share of troubles in recent years, was a surprise, and managed to hold its own during the pandemic, and attracted some investors along the way.

The "Big Five," a self-coined term consisting of McDonald's (MCD)  (up 7.8%), Chipotle (up 57.4%), Yum Brands (YUM)  (up 7.6%), Domino's Pizza (DPZ)  (up 32.2%), and Darden Restaurants (DRI)  (up 7%) are up an average of just over 22%. So, it's been a very good year for the big guys.

Bringing up the rear as the worst performer is Red Robin (RRGB) (-37.4%), which had its own struggles prior to the pandemic, and saw its fortunes fall further. The company has lost money to varying degrees for the past five quarters and is not expected to be profitable for the next two years, according to consensus estimates. The company does own the real estate for 37 of its locations; five years ago, that would have been much more significant to me than it is now given a glut of commercial real estate.

Dave & Busters (PLAY) (-35.6%) the second worst performer, has had two consecutive quarters in the red, but is expected to return to profitability on an annual basis in two years (for the year ended 1/23). The company raised a significant amount of capital in the equity and debt markets during the pandemic, increasing shares outstanding by 48% (talk about dilution), and selling $550 million in senior notes in October, with the latter being used to pay off its current term loan and revolver.

I continue to keep an eye on Kura Sushi (KRUS) (-30.3%), the first pure-play on sushi. While I'm not a fan at all of that cuisine, I'm within what appears to be a small minority. KRUS has had four consecutive negative quarters, is not expected to be profitable in 2021 or 2022, and appears to trade on potential growth prospects. Its still too rich for my blood here, but could be interesting longer term, at the right price. Maybe that right price was the $5 and change it fell to early in the pandemic, hindsight being 20/20.

My thoughts are with all the restaurant and other small business owners and employees in my state that will see another interruption in their working lives starting Saturday morning. I'm hoping that we can continue to support them, and that there are brighter days ahead.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Heller had no positions in any securities mentioned.

TAGS: Investing | Markets | Politics | Stocks | Trading | Value Investing | Restaurants | U.S. Equity | Coronavirus

More from Stocks

Corrective Action Produces Fading Confidence and Technical Damage

James "Rev Shark" DePorre
Feb 26, 2021 5:08 PM EST

It's dangerous to have too much exposure now, but the potential for a good recovery is there once interest rate issues are digested.

I'm Intrigued by the Recent Pullback in Aurora Mobile

Timothy Collins
Feb 26, 2021 3:30 PM EST

While the Chinese company is still not profitable, it is cash flow positive.

Salesforce Gets a Quant Downgrade on Top of Weakening Charts

Bruce Kamich
Feb 26, 2021 12:50 PM EST

Here's what investors and traders need to think about.

My Preference Right Now Is to Buy Pre-Deals

Timothy Collins
Feb 26, 2021 12:36 PM EST

I've added a few names that I see as a great risk-reward because of the limited downside.

I've Been a Buyer Friday, Making Partial Buys Like I Always Do

James "Rev Shark" DePorre
Feb 26, 2021 12:07 PM EST

It's premature to predict that a low has been made, but plenty of stocks are quite washed-out already and are starting to find support.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:32 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Navigating a Market Correction
  • 11:29 AM EST GARY BERMAN

    Where Does the Nasdaq Go From Here?

    Where does the Nasdaq Composite (CCMP) index go fr...
  • 12:31 PM EST GARY BERMAN

    Has the Short-Term Top Come for the XLF/Banks?

    The has triggered a long-term overbought signal ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login