Now's the Time to Bite Into Restaurants

Buffalo Wild Wings (BWLD) just reported a great quarter. EPS of 31 cents on same store sales of 8.3%. The stock is surging and trading higher than the level at which I sold the first half of my position after the company last reported.

The restaurants are back. Yum Brands (YUM) is too cheap to ignore here. I added some to my personal account yesterday on top of my already full sized position for client accounts that I accumulated last week at lower prices.

McDonald’s (MCD), my favorite name in the sector, had a big move yesterday as well. It recouped its losses after selling off after the company reported stellar earnings last week.

YUM and MCD both got kicked in the crotch because of higher commodity costs. However, I firmly believe that food commodity inflation is already in the numbers and we can see relief once we annualize some of those numbers as we enter next year. I expect the MCD board will raise its dividend next month.

YUM and MCD are both growing like wild rice over in China. I have kept out of this sector for a while but the time is right to allocate more assets to restaurants as investments. Stay away from the fixer-uppers like Starbucks (SBUX) and Denny’s (DENN) except for quick trades. Note that DENN also reported earnings after hours yesterday and is getting a bid on raised guidance despite missing estimates by a penny. DENN has way too much debt for my appetite.

Disclosure: At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of BWLD, MCD, YUM --- although positions can change at any time.

Comments

[mirqce:]

great article informative i like the reccomendations

2008 Jul 30 08:46 AM

[Bulldog:]

Mickey D's there will always be kids andyoung adults whom have grown up witht he fast food luch and dinners. This is a no-brainer stock. Like Wiggley's Chewing Gum. I call them play stocks, because, people have to eat. Denny's! Sorry I have boycotted this establishment. Extremely poor customer service. Lacks supervision and management qualities. Needs a complete revamp and overhaul before I or any of my friends go back. Walk the streets and ask people what they think of Denny's. You'll be surprise3d at all the negative comments. This one is heading towards the homeless side of town soon unless someone up top takes it serious and looks at wht their employees and managers are doing to their profits. Starbucks. LOL!! Only idiots and I mean idiots pay crazy prices for coffee. With all the problems we have in this country, ie: credit debits, foreclosures, repos! But, these same people whom are crying to the government and aid communities for help still find a money to pay more than six-bucks for a six to eight ounce of great gound coffee?!?! Wake up want to be dummies. This ain't France or Germany where we pay six to eight dollars a litere for petro, even though wer are getting there fast. Those paying high price for caffine fuel ain't helping the economy in anyway. Others are waking up too, and they see that food in the family tummy and a roof with heating and a/c is better than a cup of want to be european coffee. But if you want to look smart, act smart, and think you're smart? Go ahead keep paying high dollar of that twenty-five cent off take of louisiana cajun coffee, keep the rich even rich and the poor even poor. I say due to the economy, this one is going to fall and fall fast. They even see that, that is why the are closing down six-hundred Starbucks Cafe' Drop this one folks.

2008 Jul 30 09:55 AM