In this article, we discuss 11 best fast food stocks to buy now.
The fast food industry has rapidly evolved in the past few years as trends like the proliferation of vegan-only options, tech-based delivery, and smart appliances accelerate growth. According to a report by digital agency Linchpin, artificial intelligence, expanded beverage options, and healthy sweeteners are some of the other disruptive forces in the space that investors should be closely monitoring. Linchpin estimates that there are 200,000 fast-food restaurants located across the United States at which 50 million customers eat fast food daily.
Some of the top stocks that benefit from this influx include Starbucks Corporation (NASDAQ:SBUX), McDonald’s Corporation (NYSE:MCD), and Yum! Brands, Inc. (NYSE:YUM), among others discussed in detail below. Digital orders at fast food restaurants are one of the most important market forces. Per data from Linchpin, these have registered an increase of 23% since first implemented. The digital agency expects this figure to triple in the coming months despite the easing of coronavirus restrictions worldwide.
Our Methodology
The companies that operate in the fast food sector were selected for the list. The analyst ratings of these firms and the latest updates related to them are also discussed to provide some additional context. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
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Best Fast Food Stocks to Buy Now
11. Good Times Restaurants Inc. (NASDAQ:GTIM)
Number of Hedge Fund Holders: 5
Good Times Restaurants Inc. (NASDAQ:GTIM) engages in the restaurant business in the United States. It is one of the best fast food stocks to invest in. On August 11, Good Times Restaurants posted earnings for the third quarter of 2022, reporting earnings per share of $0.04. The revenue over the period was $36.5 million, up 7.7% compared to the revenue over the same period last year.
At the end of the second quarter of 2022, 5 hedge funds in the database of Insider Monkey held stakes worth $2.7 million in Good Times Restaurants Inc., compared to 5 in the preceding quarter worth $3.3 million.
Just like Starbucks Corporation, McDonald’s Corporation, and Yum! Brands, Inc., Good Times Restaurants Inc. is one of the best fast food stocks to buy now.
10. Jack in the Box Inc. (NASDAQ:JACK)
Number of Hedge Fund Holders: 15
Jack in the Box Inc. (NASDAQ:JACK) owns and runs quick service restaurants. It is one of the top fast food stocks to invest in. On August 10, Jack in the Box posted earnings for the third quarter of 2022, reporting losses per share of $1.38, beating market estimates by $0.04. The revenue over the period was $398.3 million, up 47.8% compared to the revenue over the same period last year and beating by market estimates by $0.93 million.
At the end of the second quarter of 2022, 15 hedge funds in the database of Insider Monkey held stakes worth $95 million in Jack in the Box Inc., compared to 22 in the preceding quarter worth $112 million.
9. Wingstop Inc. (NASDAQ:WING)
Number of Hedge Fund Holders: 20
Wingstop Inc. (NASDAQ:WING) franchises and operates restaurants under the Wingstop brand name. It is one of the premier fast food stocks to invest in. On October 17, Wingstop announced that it will give away free chicken sandwiches for a year in the form of a gift card to the first 50 fans at various locations in New York City. On October 12, Wingstop revealed the opening of its new restaurant in Emmaus. The restaurant will be owned and operated by Wingstop and Talon Restaurants.
On October 11, Deutsche Bank analyst Brian Mullan maintained a Hold rating on Wingstop Inc. stock and raised the price target to $135 from $117, highlighting that investors expected the company’s Q3 domestic same-store-sales results to be below the current consensus estimates.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in Wingstop Inc., with 825,464 shares worth more than $61.7 million.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Wingstop Inc. was one of them. Here is what the fund said:
“Other new buys included Wingstop Inc.. 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. Papa John’s International, Inc. (NASDAQ:PZZA)
Number of Hedge Fund Holders: 20
Papa John’s International, Inc. (NASDAQ:PZZA) operates and franchises pizza delivery and carryout restaurants under the Papa John’s trademark in the United States and internationally. It is one of the major fast food stocks to invest in. On October 19, Papa John’s International launched its latest Halloween-themed international market campaign.
On October 7, BTIG analyst Peter Saleh maintained a Buy rating on Papa John’s International, Inc. stock and lowered price target to $115 from $130, highlighting that at some of the company’s franchisees over the past week, sales trends slowed.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Starboard Value LP is a leading shareholder in Papa John’s International, Inc., with 2.8 million shares worth more than $230.5 million.
In its Q3 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Papa John’s International, Inc. was one of them. Here is what the fund said:
“Papa John’s International, Inc. is a global operator and franchisor of pizza delivery and carryout restaurants. The company is tracking nicely against our turnaround thesis which hinges upon an improvement in store-level economics leading to accelerating growth in restaurant development activity. Improved store-level economics is being driven in part by market share gains resulting from menu innovation. New menu items—parmesan crusted Papadias, Epic Stuffed Crust, Shaq-a-roni— coupled with enhancements to the digital/loyalty platform and supportive advertising are attracting new customers to the brand, increasing frequency of its existing customers and driving higher unit volumes and returns. As a result, the company is experiencing incremental interest from new and existing franchisees to develop new restaurants. Papa John’s opened a record 123 units in the first half of 2021 and now expects to open 220-260 new stores this year (vs. 140-180 previously)—most of which are outside of the US. Combined with ample white space globally, we believe a higher unit growth trajectory will drive an attractive and sustainable profit cycle.”
7. Restaurant Brands International Inc. (NYSE:QSR)
Number of Hedge Fund Holders: 20
Restaurant Brands International Inc. (NYSE:QSR) operates as a quick service restaurant company. It is one of the elite fast food stocks to invest in. On September 9, Burger King, a chain of Restaurant Brands International, stated that it is planning for significant spending in the next two years towards reconstructing restaurants and marketing. $400 million will be allocated to increase advertisement firepower.
On October 12, investment advisory Deutsche Bank maintained a Buy rating on Restaurant Brands International Inc. stock and lowered the price target to $68 from $70. Analyst Brian Mullan issued the ratings update.
At the end of the second quarter of 2022, 20 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in Restaurant Brands International Inc., compared to 23 in the previous quarter worth $1.8 billion.
Here is what Pershing Square Holdings has to say about Restaurant Brands International Inc. in its Q2 2021 investor letter:
“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.”
6. The Wendy’s Company (NASDAQ:WEN)
Number of Hedge Fund Holders: 28
The Wendy’s Company operates as a quick-service restaurant company. It is one of the prominent fast food stocks to invest in. On September 26, Wendy’s stated that it is adding technology to its delivery process at thousands of its restaurants in the US and Canada by partnering with an order integrator, ItsACheckmate. 6,000 locations are selected all over Canada and the US for the purpose.
On September 22, Stephens analyst Joshua Long initiated coverage of The Wendy’s Company stock with an Overweight rating and a $25 price target, highlighting that ongoing menu and breakfast innovation would be an important driver of same-store sales and continued momentum in the growth of the firm.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Trian Partners is a leading shareholder in The Wendy’s Company, with 25 million shares worth more than $478 million.
Alongside Starbucks Corporation, McDonald’s Corporation, and Yum! Brands, Inc., The Wendy’s Company is one of the best fast food stocks to buy now according to elite investors.
5. Domino’s Pizza, Inc. (NYSE:DPZ)
Number of Hedge Fund Holders: 32
Domino’s Pizza, Inc. (NYSE:DPZ) operates as a pizza company in the United States and internationally. It is one of the best fast food stocks to invest in. On October 18, Domino’s Pizza stated that it is launching its first fully women operated store in Bangladesh. This is the 12th store in Bangladesh.
On October 14, BMO Capital analyst Andrew Strelzik maintained an Outperform rating on Domino’s Pizza, Inc. stock and lowered the price target to $400 from $430, noting that softer margins and higher taxes had led the company’s Q3 earnings to miss the targets.
At the end of the second quarter of 2022, 32 hedge funds in the database of Insider Monkey held stakes worth $2.3 billion in Domino’s Pizza, Inc., compared to 27 in the previous quarter worth $1.8 billion.
In its Q2 2022 investor letter, Pershing Square Holdings, an asset management firm, highlighted a few stocks and Domino’s Pizza, Inc. was one of them. Here is what the fund said:
“Since our last update, Domino’s Pizza, Inc.’s near-term business performance has shown meaningful improvement, including three-year stacked growth for the second quarter of 17% in the U.S., up 560 basis points sequentially. This improvement was driven by the full impact of its recent pricing actions, operational changes leading to improved staffing and labor utilization, and the return of its signature Boost Week promotion. These positive developments caused a significant recovery in Domino’s share price and its valuation increased to more than 28 times our estimate of next twelve months’ earnings. In light of the company’s relatively high valuation in the context of a volatile market environment, we decided to exit our investment to raise cash for alternative investment opportunities. We have enormous respect for Domino’s and its management team led by Russell Weiner, and we expect the company to continue its long track record of success.”
4. Chipotle Mexican Grill, Inc. (NYSE:CMG)
Number of Hedge Fund Holders: 39
Chipotle Mexican Grill, Inc. (NYSE:CMG) owns and operates Chipotle Mexican Grill restaurants. It is one of the top fast food stocks to invest in. On October 19, Chipotle Mexican Grill announced that it will come to Madison by next summer after a number of requests from customers.
On October 4, Deutsche Bank analyst Brian Mullan maintained a Hold rating on Chipotle Mexican Grill, Inc. stock and raised the price target to $1,708 from $1,503, highlighting that company expects to meet Q4 consensus same-store sales estimate of 8.5%.
At the end of the second quarter of 2022, 39 hedge funds in the database of Insider Monkey held stakes worth $2.3 billion in Chipotle Mexican Grill, Inc., compared to 38 in the preceding quarter worth $2.95 billion.
In its Q1 2022 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and Chipotle Mexican Grill, Inc. was one of them. Here is what the fund said:
“Chipotle Mexican Grill, Inc. (6.0% weight in the Fund): In a recent blog post called GREAT COMPANIES ARE FORGED DURING CRISIS we discussed why companies with economic moats, relevant products and services, and those that create stakeholder value are more resilient in the face of crisis than the average company. Less advantaged competitors, in turn, struggle, which creates opportunities for great companies to get even better.
We think Chipotle navigated the COVID environment better than any major quick-serve restaurant and has consequently gone from strength to strength. Indeed, from March 1, 2020 to March 31, 2022, Chipotle shares gained 106% versus the S&P 500 Restaurants Index’s 28% return, including dividends (…read more)
3. Yum! Brands, Inc. (NYSE:YUM)
Number of Hedge Fund Holders: 40
Yum! Brands, Inc. develops, operates, and franchises quick service restaurants worldwide. It is one of the premier fast food stocks to invest in. On October 18, Pizza Hut, a chain of Yum Brands, revealed that it is launching a new menu category, Pizza Hut Melts. Pizza Hut Melts will be priced $6.99 at participating restaurants. On September 21, Taco Bell, a chain of Yum Brands, disclosed its partnership plan with Beyond Meat to launch Beyond Carne Asada Steak product.
On October 19, Cowen analyst Andrew Charles maintained an Outperform rating on Yum! Brands, Inc. stock and lowered the price target to $130 from $143, highlighting that the company was expecting a strong Q3 exit to sustain in Q4.
2. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 50
McDonald’s Corporation operates and franchises McDonald’s restaurants in the world. It is one of the elite fast food stocks to invest in. On October 19, McDonald’s recently released limited edition adult Happy Meal toys that were sold on the secondary markets for as much as $300,000. The sellers listed a total of 3 unopened toys. On October 19, McDonald’s stated that it is partnering with Krispy Kreme Donuts to offer Krispy’s donuts at nine locations.
On October 19, Credit Suisse analyst Lauren Silberman maintained an Outperform rating on McDonald’s Corporation stock and lowered the price target to $272 from $287, highlighting that the company’s strength continued in Q3 and overall sentiment remains positive broadly.
At the end of the second quarter of 2022, 50 hedge funds in the database of Insider Monkey held stakes worth $2.3 billion in McDonald’s Corporation, compared to 58 in the previous quarter worth $2.7 billion.
1. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 55
Starbucks Corporation operates as a roaster, marketer, and retailer of specialty coffee worldwide. It is one of the major fast food stocks to invest in. On October 19, Starbucks announced that it is planning to sell Seattle’s Best Coffee brand to Nestle. This sale will further strengthen the Global Coffee Alliance by allowing both companies to focus on their core strengths. The financial terms of the deal were not disclosed.
On September 22, Stephens analyst Joshua Long initiated coverage of Starbucks Corporation stock with an Equal Weight rating and a $91 price target, noting that in the long-run, the firm’s brand strength, rewards program, and coffee consumption secular tailwind position the company for growth.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Starbucks Corporation, with 5.8 million shares worth more than $444.7 million.
In its Q2 2022 investor letter, Matrix Asset Advisors, an asset management firm, highlighted a few stocks and Starbucks Corporation was one of them. Here is what the fund said:
“Starbucks Corporation is a premiere global coffee brand supported by over 32,600 stores across the world. The firm has a long history of beverage innovation and strong employee/barista relations with the firm paying above-market wages and benefits. Starbucks has a strong balance sheet and finances. The company generates steady and consistent cash flow, selling millions of cups of premium coffee every day. The company’s share price declined in part due to its large business in China which was largely shut down due to Covid restrictions and because of rising commodity and labor costs. We think the shares are attractively priced for a company that should grow 10% plus per year with a dividend yield of 2.6% at our average cost.”
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This article is originally published at Insider Monkey.
