Jim Cramer's Favorite Restaurant Stocks

by: Insider Monkey

Jim Cramer is the host of CNBC's "Mad Money" and the chairman of TheStreet.com. In 1987, Cramer started his own hedge fund and returned an average of 24% per year between 1987 and 2001. Cramer also authored six money management books.

Cramer has recommended the following foodservice companies on “Mad Money” throughout the month of August:

1. Darden Restaurants (NYSE:DRI): Darden Restaurants owns and operates beloved brands such as Red Lobster, Olive Garden, Bahama Breeze and more. CEO Clarence Otis, Jr. said earnings are expected to go higher because high gas prices (which act like a tax on the consumer) are coming down.

Cramer likes this restaurant group because of the decline in WTI crude prices. When gas prices are high, consumers have less discretionary money to spend. Cramer reminded viewers the restaurant sector bottomed first when oil peaked in 2008.

The stock has a $6.2 billion market cap, trades at 13.6 times earnings and delivers a 3.7% yield.

DRI represents almost 4% of Patrick McCormack’s (of Tiger Consumer Management) portfolio. (See McCormack’s other holdings).

2. BJ’s Restaurants (NASDAQ:BJRI): This restaurant group represents one of Cramer’s favorite restaurants. Bias aside, he gave BJRI a buy recommendation because the stock has gotten hammered too low considering its value. This large cap restaurant group owns and operates over 100 restaurants in 13 states.

The stock trades at $43.16, $13 off the 52-week high. This restaurant group’s stock has a $1.2 billion market cap.

3. Starbucks (NASDAQ:SBUX): Cramer has had immense confidence in the company since Howard Schultz’s return to the CEO position in 2008, but has really been bullish as of late. This is due to Schultz’s pledge to refrain from paying political contributions until Washington, D.C. gets their act together. He also said he would continue to hire.

This renowned coffee producer/retailer has not seen a decrease in sales lately and Cramer recommends buying this stock as the company’s gross margins could surge. SBUX has a $28 billion market cap and yields 1.4%. Ken Fisher of Fisher Asset Management has 450,000 shares in his portfolio. (See more of Fisher’s picks here).

4. McDonalds (NYSE:MCD): Cramer thinks McDonalds is perhaps the “best restaurateur in the business”. He says this is the type of company that will survive in tough economic times.

Cramer feels the “bountiful dividend” is an added bonus. The company has a $91.6 billion market cap and yield’s 2.7%. The stock is trading at $88.64, two dollars off its 52-week high.

5. Panera Bread (NASDAQ:PNRA): As a part of Cramer’s long-term trend of healthy eating, Panera has become the place to get all-around healthy, high-quality food. Cramer knows people can come here and lose weight without losing weight, which will make this a well-sought after restaurant for years to come. The restaurant has a $3.3 billion market cap and trades at 26 times earnings.

6. Chipotle Mexican Grill (NYSE:CMG): Cramer likes this healthy, fast-food concept because of its customer’s loyalty, which would allow it to raise prices if it needed to. This loyalty has been developed by consistently delivering the highest-quality food that is good for both consumers and the environment. Cramer gives it a buy recommendation, but not if it means paying-up for it.

This restaurant has a $9.67 billion market cap and trades at 51 times earnings. Louis Navellier of Navellier & Associates reduced his position by 4%. (See more of Navellier’s picks).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.