There is no shortage of interesting options in the fast food category, but with the economy turning the way it has lately, it's not obvious which names show the most promise. The names below are my five top picks.
Chipotle Mexican Grill, Inc. (NYSE:CMG), last closed at $669.70, well above where it had been trading only ten months ago in October, around $420. There is no denying that this stock is in a long trend. As seen on the weekly chart above, historical price action of Chipotle has respected the exponential moving averages by staying above the 13 EMA on the weekly chart. With current support at $600 and price currently in a shallow retracement, there is opportunity for a buy with the expectation that price will resume its long trend. Unfortunately, most of us may have missed the boat on this one as it is well above its 200 day moving average, leaving us to wonder if it is even affordable as a long investment.
McDonald's Corporation (NYSE: MCD) is trading in a tight consolidation with no indication of a breakout in either direction. Since August McDonald's has traded between $90 and $98, unable to break out of that range, seemingly unfazed by the pressures in the broad market S&P 500 (INDEXSP: INX). Despite the overtones of the industry suggesting that the general public has wisened up and is staying away from McDonald's, there is always going to be a need for fast efficient service. McDonald's continues to be on the forefront of market research to improve general operations. Currently trading at about $93.550, it is trading at the upper end of its band. Even though we saw the price of McDonald's making higher highs between November 2012 to April 2013, it has been unable to regain the same momentum in either direction. Rather than trying to guess where this stock will move next, I would wait until a trend re-establishes itself. Until I begin to see a price close outside of $94 to the short side, or $98 to the upside, I would avoid trading McDonald's. I would look for a target of around $102 if MCD breaks out to the up side. l will let this stock prove where it is moving rather than trying to place a bet on where it will move next.
Starbucks Corporation (NASDAQ:SBUX) has shown strength over the last year, moving up from trading at $52.00 in 2013 to currently trading around $77. Having moved off its highs around $82.00, in the past few months SBUX has shown signs of weakness not previously seen since one year ago when price retraced from $63.00 to $44.00 between April 2012- July 2012. In January, Starbucks broke the 21 EMA leaving investors to think that this might be the first sign of a reversal on a stock that seems to be very bullish overall. Currently trading around $73.00, price action has been a little sloppy lately with price trading above and below the 21 EMA on the weekly chart. If SBUX can push above $75, I'm liking the long trend, but if price falls below $70, then in my opinion we will see short-term weakness with price heading to the 100 EMA around $64. While the transition to food service is not going as smoothly as some might have expected, the acquisition of La Boulange will give Starbucks a good foot to stand on with breakfast options. Starbucks will adapt and continue to show positive momentum.
Dunkin Brands Group Inc (NASDAQ:DNKN) is a really strong offering. In fact, Dunkin is looking like it is in an even stronger long trend than Starbucks. Most notably, Dunkin has respected the 21 EMA as support on the weekly chart, all the way back to December 2012. One advantage to this stock is its frequent pullbacks to the moving average, which in my opinion make for good buying opportunities. Today's move in Dunkin is providing yet another buy signal. Its pullback to the 21 EMA on the weekly chart at $49 with little increase in volume is a strong indicator that Dunkin is following its historical behavior. In my opinion the current movement in Dunkin Brands is an opportunity to buy and is not indicating that sellers are taking over.
Panera Bread Co (NASDAQ:PNRA), while in somewhat of an uptrend on the weekly, continues to suffer from deep pullbacks in price. Panera has dropped some of the gains it had recorded which brought it close to the 100 EMA of $164.00. The price of PNRA has consistently retraced beyond the 13 or 21 EMA, meaning that these moving average levels are not reliable to use to enter a trade to the long side. The two most recent pullbacks have also seen heavy volume, meaning that sellers have stepped in and taken control. The pullback that is happening now could, in my opinion, easily reach the $164 or down below the $147 level it currently holds. Unlike some of the other names, I don't believe that this pullback in Panera Bread is one to buy at this time, as the stock is now trapped between the 21 and 100 EMA's.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.