Submitted by William Briat as part of our contributors program.
Top Two Restaurant Stocks to Watch into 2015
There’s simply nothing more enjoyable than a fine wine and a great meal. I’m also a beer and wings kind of guy.
Over the past decade, we have seen the popularity of food shows gain steam. Triggered by the Iron Chef series, cooking shows have become mainstream reality shows with the likes of widely popular British chef Gordon Ramsey and his Hell’s Kitchen and Master Chef series.
Yet the restaurant sector is not always about fine dining. It’s big business and often the most successful restaurant stocks are the fast food and casual dining chains, according to my stock analysis.
The chart of the Dow Jones U.S. Restaurants & Bars Index below clearly reflects the advancement in the sector since late 2012, based on my stock analysis.
Chart courtesy of www.StockCharts.com
The restaurant sector is based largely on income levels and jobs. The more people work and make, the greater likelihood they will eat out. Just look at the emerging wealth levels in China and the associated expansion of restaurants in that country.
A couple of my favorite non-fast food restaurant stocks are Chipotle Mexican Grill, Inc. (NYSE/CMG) and Texas Roadhouse, Inc. (NASDAQ/TXRH), based on my stock analysis.
Chipotle is one of the top restaurant stocks at this time. My stock analysis indicates that the company has been taking market share away from Taco Bell, which is owned by YUM! Brands, Inc. (NYSE/YUM), and McDonalds Corporation (NYSE/MCD).
For Chipotle, there was an excellent buying opportunity in October 2012, when the stock fell to a 52-week low of $233.82 and has since rallied 158%. At the current price, Chipotle is looking top-heavy, but it could be worth a look on weakness, based on my stock analysis.
For more of a sit-down casual meal, a restaurant stock I like is Texas Roadhouse. The network includes more than 425 restaurants across 48 states and three countries. Whether it’s burgers, fries, salads, or seafood, there’s something for everyone here.
Texas Roadhouse has been a model of consistency, reporting higher sequential revenue growth over the past 12 years, from $159.91 million in 2001 to $1.42 billion in 2013. The growth is estimated by Thomson Financial to continue into 2014 and 2015.
Texas Roadhouse has also delivered on the earnings end, reporting higher earnings growth in 11 of the last 12 years, and this is expected to continue into 2014 and 2015, which presents a buying opportunity.
Other restaurant stocks that are worth a look, based on my stock analysis, include The Cheesecake Factory Incorporated (NASDAQ/CAKE) and Ruths Hospitality Group, Inc. (NASDAQ/RUTH).
Whatever your situation, my stock analysis suggests that there’s money to be made in the restaurant sector, especially if the economy improves and people become more confident in spending some cash.