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10 Best Fast Food Stocks to Buy Now

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·9 min read
In this article:
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  • JACK
  • QSR
  • WING
  • PZZA
  • WEN
  • MCD

In this article, we discuss the 10 best fast-food stocks to buy now. You can skip our detailed analysis of the fast-food stocks and go directly to read the 5 Best Fast Food Stocks to Buy Now.

The fast-food industry suffered huge losses in the face of the pandemic, ending 2020 with the closure of over 110,000 restaurants in the U.S. This, however, opened new avenues for the fast-food industry, shifting the focus to online delivery through digital channels. The pandemic-centric restrictions allowed the fast-food chains to expand their digital ordering channels to provide contactless deliveries for the convenience of customers. According to McKinsey & Company, in the U.S., food delivery saw an 8% growth in 2020, becoming a global market, worth $150 billion.

According to a report by Ibis World, the U.S. fast-food market size is valued at $278.6 billion in 2021, presenting an 8.9% growth from 2020. The growth is attributed to the drive-thrus, self-ordering, online orders, and a shift to expanded vegan options.

S&P Food & Beverage Industry Index gained 18.6% in the past year.

CNBC published a report asserting that fast-food restaurants are rebounding, now more than ever, especially after the vaccine process. Drive-thru deliveries represented 44% of the orders across the fast-food industry in 2020. Moreover, digital sales also grew by 124% in 2020, as per the data collected by NPD Group. According to Goldman Sachs, though restaurants suffered a $150 billion loss in sales in 2020 due to the pandemic, the industry is well-positioned for recovery.

Some of the notable fast-food stocks in this regard are McDonald's Corporation (NYSE:MCD), Starbucks Corporation (NASDAQ:SBUX), Chipotle Mexican Grill, Inc. (NYSE:CMG), Yum! Brands, Inc. (NYSE:YUM), and Domino's Pizza, Inc. (NYSE:DPZ).

Our Methodology

Let's analyze our list of the best fast-food stocks to buy now. For this list, we considered hedge fund sentiment, analysts' rating, and fundamentals. The stocks are ranked according to the number of hedge fund positions in each of them.

10 Best Fast Food Stocks to Buy Now
10 Best Fast Food Stocks to Buy Now

Why pay attention to hedge fund sentiment while choosing stocks?

Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Best Fast Food Stocks to Buy Now

10. Restaurant Brands International Inc. (NYSE:QSR)

Number of Hedge Fund Holders: 22

Restaurant Brands International Inc. (NYSE:QSR) reported its Q3 results on October 25, posting an EPS of $0.76, beating the estimates by $0.02. The company’s revenue for the quarter also showed an 11.9% growth from the prior-year quarter at $1.5 billion.

Restaurant Brands International Inc. (NYSE:QSR) is a Canadian-American fast-food holding company that owns some of the most famous fast-food chains, such as Burger King, Popeyes, and Tim Hortons. On October 26, Restaurant Brands International Inc. (NYSE:QSR) declared a quarterly dividend of $0.53 per share, yielding 3.42%.

This August, Oppenheimer upgraded Restaurant Brands International Inc. (NYSE:QSR) to Outperform, with an $80 price target. As of Q2, 22 hedge funds tracked by Insider Monkey reported having stakes in Restaurant Brands International Inc. (NYSE:QSR), down from 26 in the previous quarter. The total value of these stakes is over $2 billion.

Like McDonald's Corporation (NYSE:MCD), Starbucks Corporation (NASDAQ:SBUX), Chipotle Mexican Grill, Inc. (NYSE:CMG), Yum! Brands, Inc. (NYSE:YUM), and Domino's Pizza, Inc. (NYSE:DPZ), Restaurant Brands International Inc. (NYSE:QSR) is also one of the most notable stocks to invest in.

Pershing Square Holdings, Ltd. mentioned Restaurant Brands International Inc. (NYSE:QSR) in its Q2 2021 investor letter. Here is what the firm has to say:

QSR’s franchised business model is a high-quality, capital-light, growing annuity that generates high-margin brand royalty fees from three leading brands: Burger King, Tim Hortons and Popeyes. The company has nimbly navigated the COVID-19 pandemic and continues to make progress on returning its brands to sustainable long-term growth.

Since the onset of the COVID-19 pandemic, the company has bolstered its safety procedures and is accelerating its digital investments by expanding its delivery footprint, modernizing its drive-thru experience, increasing mobile ordering adoption, and improving its loyalty programs. As the global recovery continues to be uneven, these initiatives will allow the company and its franchisees to serve customers in a safe and reliable manner.

Each of the company’s brands are at various stages in recovery, with Burger King and Popeyes having returned to growth, while Tim Hortons is well on its way to recovering. On a two-year basis, same-store-sales grew 2.4% at Burger King and 24.4% at Popeyes during the last quarter. Meanwhile, Tim Hortons in Canada has improved to a mid-single digit decline in July, with each month during the second quarter showing sequential improvement. Tim Hortons’ slower recovery is largely driven by strict COVID-19 restrictions in Canada, which were only recently lifted in large provinces such as Ontario. In rural and suburban parts of Canada where restrictions were lifted earlier, Tim Hortons has already returned to growth. Given the habitual nature of Tim Hortons’ customer base, the recovery in sales will be tied to mobility and reopening.

The company expects to return to its historical mid-single-digit unit growth this year, and recently announced expansions for both Tim Hortons and Popeyes in large international markets. As underlying sales trends at each of its brands continue to improve, and as the impact from COVID-19 restrictions ease, we believe Restaurant Brands’ share price will more accurately reflect our view of its improving business fundamentals.”

9. Wingstop Inc. (NASDAQ:WING)

Number of Hedge Fund Holders: 24

In October, Truist lifted its price target on Wingstop Inc. (NASDAQ:WING) to $194, with a Buy rating on the shares, highlighting the company’s sales gain during the pandemic.

Wingstop Inc. (NASDAQ:WING) is a multinational chain of restaurants that specializes in chicken wings. As of Q2, Fundsmith LLP is the largest shareholder of Wingstop Inc. (NASDAQ:WING), owning shares worth $88.4 million. In addition, 24 hedge funds tracked by Insider Monkey reported having stakes in the company in Q2, up from 23 in the previous quarter. The total worth of these stakes is over $230.7 million.

ClearBridge Investments mentioned Wingstop Inc. (NASDAQ:WING) in its Q2 2021 investor letter. Here is what the firm has to say:

“Other new buys included Wingstop. Wingstop, meanwhile, in the consumer discretionary sector, is doing to chicken wings what Domino’s did to pizza. With a strong digital model, the franchise-based business has a long runway for growth with an existing base of 1,500 stores expanding to potentially 6,000 units and compelling franchisee economics.”

8. Jack in the Box Inc. (NASDAQ:JACK)

Number of Hedge Fund Holders: 29

Jack in the Box Inc. (NASDAQ:JACK), an American fast-food restaurant chain, recently signed seven developmental agreements to open 47 new restaurants in Q4 of 2021.

This August, Cowen launched its Restaurant Conviction List, with Jack in the Box Inc. (NASDAQ:JACK) as one of its top picks, owing to the company’s strong digital presence. On August 16, Jack in the Box Inc. (NASDAQ:JACK) announced a quarterly dividend of $0.44 per share, yielding 1.7%. In Q2, the company reported revenue of $269.5 million, showcasing an 11.2% year-over-year growth. Jack in the Box Inc. (NASDAQ:JACK) also beat an EPS by $0.30, at $1.79.

Of the 873 hedge funds tracked by Insider Monkey, 29 hedge funds have positions in Jack in the Box Inc. (NASDAQ:JACK) in Q2, compared with 30 in the previous quarter. The total value of these stakes is $227.1 million.

7. The Wendy's Company (NASDAQ:WEN)

Number of Hedge Fund Holders: 30

In Q2 2021, The Wendy's Company (NASDAQ:WEN) presented a positive hedge fund sentiment, as 30 hedge funds in the Insider Monkey database reported having stakes in the company, up from 26 in the previous quarter. The total value of these stakes is over $1.07 billion.

The Wendy's Company (NASDAQ:WEN) is an American holding company for the fast-food chain, Wendy’s. Recently, the company announced its collaboration with Google Cloud to enhance the restaurant experience through data-driven insights. On August 11, The Wendy's Company (NASDAQ:WEN) declared a 20% increase in its quarterly dividend at $0.12 per share, yielding 2.18%. In October, Loop Capital lifted its price target on The Wendy's Company (NASDAQ:WEN) to $31, with a Buy rating on the shares.

6. Papa John's International, Inc. (NASDAQ:PZZA)

Number of Hedge Fund Holders: 30

Papa John's International, Inc. (NASDAQ:PZZA), an American pizza restaurant franchise, showed solid results in Q2, posting an EPS of $0.93, beating the estimates by $0.20. The company reported a 21.2% growth in comparable sales globally.

Starboard Value LP is the largest shareholder of Papa John's International, Inc. (NASDAQ:PZZA) in Q2, with over 3.4 million shares. Overall, 30 hedge funds tracked by Insider Monkey reported owning stakes in the company, valued at $739.2 million. In the previous quarter, 32 hedge funds had positions in Papa John's International, Inc. (NASDAQ:PZZA).

In October, KeyBanc lifted its price target on Papa John's International, Inc. (NASDAQ:PZZA) to $140, while keeping an Overweight rating on the shares. On August 5, the company’s board increased its quarterly dividend by 56% to $0.35 per share, yielding 1.22%. In the past year, Papa John's International, Inc. (NASDAQ:PZZA) gained 65.7%.

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Disclosure. None. 10 Best Fast Food Stocks to Buy Now is originally published on Insider Monkey.