The Fantasy Football season is approaching and all of sports geeks on the planet will soon dive head first into our magazines, spreadsheets and YouTube videos of players we have never heard of in hopes of finding that diamond in the rough that takes us to the championship game. Thankfully I found a brilliant way to talk about the upcoming football season while still having the conversation be relevant to SA readers - I am going to compare stocks to various football players and their future success this season/year.
For my first article I focused on quarterbacks, now it is time for the running backs - I mean restaurant stocks.
McDonald's Corp. (MCD) - The stock that every retiree depends on for performance and 3%+ dividend has had a disappointing 1st half of the year losing 10.5% of its value YTD. The restaurant and bars industry is currently trading at 20x forward earnings as a whole but MCD is only trading at 15.5x earnings. I am a long term believer in McDonald's and the current discount to peers provides investors with an opportunity to enter into a position. If you need a comparison to a fantasy football player who like MCD was once at the top of the world and has taken a step back it would be Adrian Peterson. The superstar running back has been a top 3 fantasy running back since his rookie year and was having a fine year last year until injuries ended his season during the fantasy football playoffs. Backup Toby Gerhart performed admirably in Peterson's absence and may end up biting into AP's carries until he can prove he can carry the load again. The preseason has never had more significance for a fantasy football season than it is for AP, keep an eye on Vikings games and make sure he is 100% before you spend a 1st round pick on the stud from Oklahoma.
Yum! Brands, Inc. (YUM) - The owner of KFC, Taco Bell and Pizza Hut has made giant inroads in China and should benefit from the ever increasing size of the Chinese middle class. YUM is trading at almost 19x forward earnings and sports a 1.8% dividend yield. Earnings expectations for the next 7 quarters are hefty and many expect the shares to continue their rise, up 10% already YTD. I believe the shares have more room to run as YUM is a fantastic way to play emerging markets. The running back whose fantasy expectations are the closest to YUM is that of LeSean McCoy. Shady is coming off a fantastic season gaining 1600 yards and scoring 20 TD's. It is going to be very hard for McCoy to beat those numbers but I would not be surprised if he could produce a similar type of season. His value rises considerably in PPR leagues and the prospect of a full season with a more mature Michael Vick makes Shady a top 3 overall pick.
Chipotle Mexican Grill, Inc. (CMG) - I would like to start this analysis off by saying that I am an incredible fan of the food, but with that being said the stock is trading at an extremely lofty valuation that it just shouldn't be at. Trading at 40x forward earnings means CMG is the cream of the crop and that all believe the future looks very bright. Even if the world economy grows at a higher pace than predicted CMG has seen its peak for the next 5 years. Shares are down from recent highs in the $440 area to $380 and may have more room to slide, just like fantasy running back Ray Rice. Rice had an incredible 2011 with over 2000 yards rushing and receiving and 15 combined touchdowns. The Ravens spent a 3rd round pick on RB Bernard Pierce from Temple, a beast of a back who is sure to vulture TD's from Rice. Other than the Pierce selection I have no justifiable reasoning for Rice to stumble further in the fantasy rankings but his #3 average draft position means owners will have to pay top dollar.
I would like to engage the readers to see how they view the following comparisons. Please leave your comments, and thanks for reading!
MoJo Drew - The Wendy's Company (WEN)
Arian Foster - Buffalo Wild Wings Inc. (BWLD)
Trent Richardson - Dunkin' Brands Group Inc. (DNKN)
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.