As many of you know, my top buying opportunity in the fast food sector is McDonalds Corporation (NYSE/MCD). The restaurant, with its “golden arches” that are easily recognizable from miles away, is—and in my estimate, will continue to be—the “Best of Breed” in its sector. There will obviously be challengers, but I highly doubt any company will be able to vault over McDonalds. (Read “The Secret to Success in the Fast Food Sector.”)
Below, the chart of McDonalds shows the company’s impressive and steady share price appreciation from less than $20.00 in 2003 to more than $98.00 today. (What a great buying opportunity that was a decade ago!)
As you can see in the chart, the stock (red candlesticks) has also outperformed the S&P 500 (green line), based on my technical analysis.
Chart courtesy of www.StockCharts.com
Of course, there will be those companies that will try to emulate the success that made McDonalds what it is today—a $100-billion worldwide fast food empire and a good long-term buying opportunity.
Take Burger King Worldwide, Inc. (NYSE/BKW), for instance, which is about 14-times smaller than McDonalds based on market capitalization. The seller of the “Whopper” has expanded its menu offerings, but based on the results so far, it is not a threat to the “Big Mac.”
In its second quarter, Burger King reported an abysmal 48.5% decline in its revenues to $278.3 million—well below the Thomson Financial consensus estimate of $322.3 million. The company blamed its plunge in revenues on the business climate and competition.
Heck, while I’m not much of a fast food eater, I would be more inclined to go to McDonalds than Burger King. But another one of my top fast food stocks is Chipotle Mexican Grill, Inc. (NYSE/CMG), which may also offer an attractive buying opportunity.
A few months back, I also talked about Denny’s Corporation (NASDAQ/DENN), the maker of the “Grand Slam” breakfast, as a potential buying opportunity. (Read “Denny’s Serves Up Grand-Slam Returns.”) Denny’s is no match for McDonalds, but it’s not meant to be, as it’s in a different class of restaurants with a focus on dine-in and higher-cost food and services.