Ten Most Popular Restaurant Stocks Among Hedge Funds
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It’s been a weak recovery for the U.S. economy as a whole and for consumer stocks in general, but the restaurant industry has been the exception. The industry has actually added jobs over the last several years; in August the economy added an estimated 96,000 jobs with 28,300 of those coming in restaurants. Over half a million jobs have been added in the last two years as customers flock to old standbys and to growing quick service restaurants. According to our database of 13F filings, here are the ten most popular restaurant stocks among hedge funds as of the end of June. Read on or compare to last quarter's rankings.
McDonald’s (NYSE: MCD). The Golden Arches was hedge funds’ top pick as 35 of them reported a position in the stock. This was down from 40 in the first quarter but thanks to an even greater decline at Yum! Brands the burger-and-fries joint was able to march into the top spot. The company’s business has been stagnant recently but it trades at 17 times trailing earnings, a reasonable multiple for such a strong global brand. Fisher Asset Management moved heavily into the stock during the second quarter.
Yum! (NYSE: YUM). 33 funds reported a position in Yum Brands at the end of June as it slipped to being the second most popular restaurant stock. Yum’s strong position in China may be starting to become more of a liability than an asset as investors become more concerned about the Chinese economy. Billionaire Steve Cohen’s SAC Capital Advisors increased its position and owned about 940,000 shares at the end of June.
Starbucks (NASDAQ: SBUX). 32 hedge funds and other major investors reported a position in Starbucks, a decline from the previous quarter. The coffee shop (and occasional wireless Internet provider) is up 33% over the last year and currently trades at 28 times trailing earnings.Fisher Asset Management, managed by billionaire Ken Fisher, added shares during the quarter and is now the largest holder of the stock in our database.
Domino’s Pizza (DPZ). Domino’s was the most frequently owned restaurant stock to report an increase in ownership, as the 24 funds who owned the stock at the end of March ticked up to 25 for the second quarter. Renaissance Technologies, founded by billionaire Jim Simons, was one of the funds reporting a position in the stock.
Chipotle Mexican Grill (NYSE: CMG). Hedge funds stayed faithful to the breakout burrito restaurant, with its 24 hedge fund holders unchanged from the previous quarter. At a trailing P/E of 41, these investors are counting on rapid growth (the company grew its earnings 61% last quarter compared to a year ago) to continue. Stanley Druckenmiller’s Duquesne Capital increased its stake by 24% in the quarter.
Panera Bread (NASDAQ: PNRA). 20 funds in our 13F database reported a position in Panera at the end of June, up from 19 at the beginning of April. Panera is another growth-oriented restaurant, as it trades at 31 times trailing earnings. Billionaire Ken Griffin’s Citadel Investment Group more than doubled its position to about 240,000 shares.
Dunkin Brands (DNKN). The 26 funds with a position in Dunkin at the beginning of the quarter had fallen to 19 three months later. Dunkin too is trying to expand- geographically from its New England base, in this case- and has a high earnings multiple, at 76. Coatue Management, run by Tiger Cub Phillipe Laffont, was one hedge fund with a position in the restaurant.
Jack in the Box (JACK). At only a $1.2 billion market cap, the fast food company made it onto our list with 16 funds reporting a position in the stock. This was an increase from 11 for the first quarter. Nantahala Capital Management owned about 700,000 shares at the end of June.
Papa John’s (PZZA). Papa John’s also has a relatively low market cap- $1.2 billion- considering its ownership by 15 hedge funds and other major investors (up from 14 a quarter ago). Israel Englander’s Millennium Management was one hedge fund reporting ownership of the stock.
Wendy’s (WEN). Wendy’s saw decreased hedge fund interest, with 14 members of our 13F database owning the stock. Activist investor Nelson Peltz’s Trian Partners owned 83 million shares of Wendy’s at the end of June, a stake worth nearly $400 million.
This article is written by Matt Doiron and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool owns shares of Chipotle Mexican Grill, McDonald's, Panera Bread, and Starbucks and is short Starbucks. Motley Fool newsletter services recommend Chipotle Mexican Grill, McDonald's, Panera Bread, Starbucks, and Yum! Brands. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.