Papa John’s Int’l, Inc. (PZZA), Domino’s Pizza, Inc. (DPZ): Can Pizza’s Popularity Increase Your Net Worth?

Two oft-mentioned threats are a weak macroeconomic environment and increased cheese costs. With regards to the former, Papa John’s should be able to weather any economic storms relatively well, but it wouldn’t be the best resilient play in the space. As stated earlier, that would belong to Yum! Brands. As far as the latter is concerned, cheese prices are volatile. Reacting to moves in cheese costs would likely be unwise, as prices are likely to change quickly. Plus, these increases costs can be made up for in other areas.

Other options

Domino’s Pizza, Inc. (NYSE:DPZ) s has been on a tear. Over the past three years, the stock has appreciated 439%. Domino’s Pizza, Inc. (NYSE:DPZ) continues to expand domestically and internationally. Thanks to menu innovation and effective advertising, traffic has steadily increased. In the second quarter, domestic comps increased 6.7% (5.7% in company-owned units/6.8% in franchise units).

Domino’s also has to deal with increased food costs, but after beating earnings expectations and revenue jumping 10% year over year, it doesn’t look as though it will slow Domino’s Pizza, Inc. (NYSE:DPZ) down much.

Yum! Brands, Inc. (NYSE:YUM) offers the most geographic and brand diversification. The stock suffered late last year and earlier this year due to an investigation of the quality of the chicken used at KFC restaurants in China. Then, just as the company looked to get back on track, a breakout of the Avian flu in China set the stock back again. However, these were both temporary negative events, which often represent the best time to buy. Despite these headwinds, Yum! Brands has bounced back, demonstrating its resiliency.

Conclusion

Barring a stock market collapse, all three stocks should continue to appreciate. Papa John’s and Domino’s should appreciate the fastest, but they also present more downside risk. Since this column focuses on capital preservation as a number one priority, Yum! Brands, Inc. (NYSE:YUM) is the top recommendation for this group.

The article Can Pizza’s Popularity Increase Your Net Worth? originally appeared on Fool.com is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool owns shares of Papa John’s International (NASDAQ:PZZA). Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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