Fast-Food Stocks Can Bring Fast Profits
Nate is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Restaurant stocks are interesting. Sometimes I blow hot on them and sometimes cold. Just yesterday I was sitting with my family at a fast-food place in Summerville, SC and in the booth behind me the manager was interviewing a series of folks in their early 20s for positions. She (the manager) went on about what the job would entail and so forth, but mostly I focused on how much she seemed to want these kids to work there. Not one of the three I listened to wasn't asked back to meet the store's General Manager.
Now, honestly, I had a theory I developed back during my dotcom days. Those were heady times in Washington DC. We were, honestly, just yanking people off the streets and making them network admins and telling them to figure it out as they went. About that time, I started noticing in the malls that every single store had a 'Now hiring' sign taped on the glass. The local burger joint near my home had a sign in the drive-thru window offering $1000 as a longevity bonus if a person came on board and stayed there 3 months. 3 months!
I think that's happening again. I'm seeing those taped-up pieces of paper again. My eavesdropping yesterday is leading me to believe that business is picking up for fast-food restaurants and they need new bodies, badly. That might be rough for them, but for investors it can means there's some money in fast food.
Parenthetical aside: I once worked for a former head of the National Restaurant Association. He was famous for threatening to fire anyone who called them “fast food” and required us to say “quick service.” Oy.
Anyway, here's my list of fast food places that are likely to do well as things get better this year.
Panera (NASDAQ: PNRA):
This upscale eatery is fast food, don't let it fool you. But it will fool you if you let it and that's a good thing for investors. The food is quick, tasty and expensive. A dinner for a family of four can cost nearly $50 (I type from experience) and people seem to enjoy paying the price. Panera means bread (no fooling) and that's what you can make at this not-the-bottom-of-the-barrel eatery. Stock-wise, its price has grown more than 10% over the last year and is now at $164.88 as I write this. It doesn't pay a dividend, though, so you'll have to count on the growth to make your profits.
Starbucks (NASDAQ: SBUX):
Not often thought of as a fast food chain, the coffee mega-chain certainly qualifies if you think for a moment. They serve drinks and food, you line up to get it, and it's staffed mainly by the younger set. Starbucks is another chain that had some rough patches in a down economy. But the marketing is paying off in a growing world. The firm's stock is up $10 in three months, they've increased the dividend by almost 25% and there's a feeling that the Seattle powerhouse is back.
Sonic (NASDAQ: SONC):
Not as well known as the top two on this list, Sonic is a drive-in burger place that sells a bit of 50s and 60s nostalgia that most customers (in my experience: kids) won't have ever come anywhere close to experiencing. Still, the firm has a good routine going. Sonic is in the top 5 in terms of popularity for burger chains and the stock reflects it, growing from $6.55 a year ago all the way to $10.67 today. A price like that means you could pick up a serious quantity of shares, if you have the money.
Yum! Brands (NYSE: YUM):
Casual investors (or just folks who like fast food) might not have heard of Yum! Brands. The Louisville-based firm is known in investor circles as a sneaky player who owns multiple fast food chains. Pizza Hut, Taco Bell, KFC and WingStreet are all a part of the Yum! empire. Yum! Was spun off from Pepsico in the 1990s and each of their 35,000+ restaurants will only EVER serve Pepsi products (beverage investors, take note). The firm has a strong international growth focus these days with acquisitions in China and chains opening in locations as remote as the west bank city of Ramallah. Its stock had a bumpy ride last year, but is up more than 10% overall. There's a 34 cent dividend as well.
So take a look at those, my friends. Investing in fast food shouldn't be intimidating. Remember, it's a way to get some of your own back whenever you stop in for a bite to eat. Just don't let my old boss catch you calling it fast food. Otherwise you might end up being interviewed like those kids I heard yesterday.
More columns by Nate Wooley:
nwooley has no position in any stocks mentioned. The Motley Fool recommends Panera Bread and Starbucks. The Motley Fool owns shares of Panera Bread and Starbucks. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!