In this article, we discuss 5 buy-the-dip restaurant stocks to invest in now. If you want to see more stocks in this list, check out 10 Buy-The-Dip Restaurant Stocks to Invest in Now.
5. Darden Restaurants, Inc. (NYSE:DRI)
Number of Hedge Fund Holders: 32
YTD Share Price Decline as of July 22: 18.44%
Darden Restaurants, Inc. (NYSE:DRI) is an American company that owns multiple fine dining and casual restaurants such as Eddie V’s, The Capital Grille, Olive Garden Italian Restaurant, LongHorn Steakhouse, Bahama Breeze, Seasons 52, Yard House, and Cheddar’s Scratch Kitchen. The stock has declined about 18.5% year to date as of July 22.
On June 27, BofA analyst Katherine Griffin reinstated coverage of Darden Restaurants, Inc. (NYSE:DRI) with a Buy rating and a $145 price target. The demand for Darden Restaurants, Inc. (NYSE:DRI) is “benign if not favorable”, said the analyst, who sees Darden Restaurants, Inc. (NYSE:DRI) well-positioned to capture volume growth “in all forms” from off-premise channels and high demand for dining occasions.
According to Insider Monkey’s data, 32 hedge funds were bullish on Darden Restaurants, Inc. (NYSE:DRI) at the end of Q1 2022, up from 30 funds in the last quarter. Brandon Haley’s Holocene Advisors is the largest shareholder of the company, with 482,026 shares worth $64 million.
4. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY)
Number of Hedge Fund Holders: 36
YTD Share Price Decline as of July 22: 12.12%
Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) operates full-service restaurants with video arcades in the United States and Canada. On July 21, Raymond James analyst Brian Vaccaro removed Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) from the firm’s Analyst Current Favorites list, citing its lack of short-term catalysts. The analyst still kept a Strong Buy rating on the stock, saying that latest sales remain strongly positive versus 2019 and the company can maintain greater margins in a post-COVID environment on the back of operational and efficiency gains.
According to Insider Monkey’s data, 36 hedge funds were bullish on Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) at the end of the first quarter of 2022, with collective stakes worth $762.5 million, up from 28 funds in the last quarter, holding stakes in the company valued at $436.75 million. Scott Ross’ Hill Path Capital is the leading shareholder of the company, with more than 5 million shares worth $246.3 million.
3. Chipotle Mexican Grill, Inc. (NYSE:CMG)
Number of Hedge Fund Holders: 38
YTD Share Price Decline as of July 22: 20.31%
Chipotle Mexican Grill, Inc. (NYSE:CMG) is an American chain of fast casual restaurants in the United States, the United Kingdom, Canada, Germany, and France. The shares declined 20.31% year to date as of July 22. UBS analyst Dennis Geiger reiterated a Buy rating on Chipotle Mexican Grill, Inc. (NYSE:CMG) on July 19 and lowered the firm’s price target on the stock to $1,900 from $2,100 ahead of its Q2 results. As per the analyst, investors expect that the company’s comps are slowing from approximately 11% expected in Q2 to 7.7% consensus for Q3. He added that while sentiment on Chipotle Mexican Grill, Inc. (NYSE:CMG) is skewed negatively in the short-term, the long-term growth potential remains intact.
According to Insider Monkey’s data, 38 hedge funds were bullish on Chipotle Mexican Grill, Inc. (NYSE:CMG) at the end of Q1 2022, down from 47 funds in the earlier quarter. Bill Ackman’s Pershing Square is the biggest shareholder of the company, with 1.11 million shares worth $1.76 billion.
Here is what Ensemble Capital has to say about Chipotle Mexican Grill, Inc. (NYSE:CMG) in its Q1 2022 investor letter:
“Chipotle (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.
To be sure, going into 2020, Chipotle had some recent experience in managing through a crisis. Its self-inflicted foodborne illness crisis that occurred in 2015 and 2016 threatened to permanently impair Chipotle’s brand value and damage customer trust. While the company made some changes at the top, bringing in Brian Niccol as CEO, and reorganized its food preparation processes, it did not abandon its mission of providing customers with freshly-prepared, sustainably-sourced food. Even at the nadir of its crisis, the average revenue of a Chipotle restaurant remained in line with the average fast casual restaurant in the US.
When COVID arrived, Chipotle quickly made changes to its strategy. It had planned on doing a marketing push for its new Queso Blanco cheese dip in March 2020 but pivoted to free delivery to ensure its customers could get Chipotle during quarantine. Because Chipotle restaurants are all company-owned (versus most fast-food chains being franchise models), it was nimble amid panic in the restaurant industry. The company continued to build restaurants (161 new stores in 2020) and seized the opportunity to move into prime locations and add more “Chipotlane” drive-thrus…” (Click here to see the full text)
2. Yum! Brands, Inc. (NYSE:YUM)
Number of Hedge Fund Holders: 45
YTD Share Price Decline as of July 22: 12.51%
Yum! Brands, Inc. (NYSE:YUM) is an American fast food corporation that operates under the KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill brands. On July 23, Barron’s said that Yum! Brands, Inc. (NYSE:YUM) looks particularly attractive in a macro environment that represents soft growth. The stock has declined 12.5% year to date.
On July 21, Citi analyst Jon Tower reiterated a Buy rating and lowered the firm’s price target on the shares to $145 from $148. According to the analyst, Yum! Brands, Inc. (NYSE:YUM) shares exhibit “limited volatility” around earnings, who see an opportunity for the management to reaffirm higher confidence in the long-term.
Among the hedge funds tracked by Insider Monkey, 45 funds were bullish on Yum! Brands, Inc. (NYSE:YUM) at the conclusion of the first quarter of 2022, up from 36 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the largest position holder in the company, with 2.2 million shares worth $270 million.
1. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 58
YTD Share Price Decline as of July 22: 28.36%
Starbucks Corporation (NASDAQ:SBUX) is an American multinational chain of coffeehouses. Despite the shares declining over 28% year to date, Starbucks Corporation (NASDAQ:SBUX) remains an attractive stock to buy on the dip. On June 29, the company declared a quarterly dividend of $0.49 per share, in line with previous. The dividend is payable on August 26, for shareholders of record on August 12.
On July 21, Citi analyst Jon Tower raised the price target on Starbucks Corporation (NASDAQ:SBUX) to $84 from $76 and kept a Neutral rating on the shares. However, the management “will tease the idea” that labor investment may be modest, and Starbucks “may meaningfully accelerate” U.S. unit growth in the next 12-24 months, added the analyst, who expects U.S. comp upside versus the Street this quarter.
According to Insider Monkey’s data, 58 hedge funds were bullish on Starbucks Corporation (NASDAQ:SBUX) at the end of March, up from 53 funds in the last quarter. Terry Smith’s Fundsmith LLP is the leading stakeholder of the company, with 8.2 million shares worth $749 million.
Here is what Polen Focus Growth Fund has to say about Starbucks Corporation (NASDAQ:SBUX) in its Q1 2022 investor letter:
“We trimmed our positions in most of these companies in 1Q 2022 and sold our stake in Starbucks after a 12+ year holding period. In our view, Starbucks continues to be in a unique position to serve its customers who value the quality of its products and the convenient way they can be purchased. At the same time, Starbucks’ business is maturing in western markets, and its employee and store-related costs are growing, which should lead to slower earnings growth than we would prefer and further P/E multiple compression. We believe we have better opportunities as we continue to assess the impact of these issues for Starbucks.”
You can also take a look at 10 Most Shorted Stocks to Watch in July and 10 Dividend Stocks of All Time.
