Below we deliver the list of Top 5 Restaurant Stocks to Buy Now. For our methodology and a more comprehensive list please see Top 10 Restaurant Stocks to Buy Now. Note that all hedge fund data is based on the exclusive group of 800+ funds tracked by Insider Monkey as part of our market-beating investment strategy.
5. Darden Restaurants, Inc. (NYSE:DRI)
Darden Restaurants, Inc. (NYSE:DRI) ranks as the fifth best restaurant stock to buy now. 41 hedge funds were long DRI on September 30, a 64% surge since the middle of 2019. Andreas Halvorsen’s Viking Global and George Soros’ Soros Fund Management are among DRI’s largest hedge fund shareholders.
Darden operates several casual dining brands, including Olive Garden, LongHorn Steakhouse, The Capital Grille, and Bahama Breeze. Darden has managed to remain profitable in the current challenging environment, earning diluted EPS of $0.72 in its fiscal Q2 and the company appears poised for a strong 2021 in what is shaping up to be a reduced competitive environment in the casual dining space following the closure of over 100,000 restaurants in the U.S.
4. Yum! Brands, Inc. (NYSE:YUM)
Yum! Brands, Inc. (NYSE:YUM) tops its Chinese counterpart (which ranked sixth), coming in at fourth place. After a massive exodus from the stock between 2015 and 2017 that was partly due to the split from its Chinese operations, hedge funds have been slowly trickling back into YUM since early 2018. 42 of them were long YUM on September 30.
As with many other restaurants, YUM has been focused on boosting its digital initiatives this year, which has resulted in its system-wide digital sales mix rising above 30%. Digital sales grew by 25% year-over-year to $4 billion during Q3 even as same store sales were flat (at those locations which were open). Taco Bell was YUM’s strongest performing brand during Q3, growing same store sales by 3%, while Pizza Hut and KFC suffered 3% and 4% dips respectively.
3. Chipotle Mexican Grill, Inc. (NYSE:CMG)
The coronavirus hasn’t been able to stop Chipotle Mexican Grill, Inc. (NYSE:CMG) shares from continuing their impressive run since the start of 2018, during which they’ve gained over 350%. The stock, which was owned by 51 hedge funds on September 30, has gained another 65% this year.
Ensemble Capital, which owned 21,387 CMG shares at the end of September, discussed the stock in its Q3 investor letter, praising the company for its fresh food concept and ensuring the consistency and quality of its food by paying a premium to retain its staff in an industry that is marked by high employee turnover. Ensemble Capital noted that while CMG shares may seem expensive at the moment, the company has a great opportunity ahead of it to grow into those expectations, including through its plans to double its store count in the U.S. International expansion, an area in which Chipotle has thus far treaded lightly, could drive additional growth further down the line.
2. McDonald’s Corporation (NYSE:MCD)
A major new stock pick of billionaire Ray Dalio, McDonald’s Corporation (NYSE:MCD) was owned by 65 hedge funds at the end of Q3, a 14% jump from a quarter earlier. Nonetheless, it remains well below its all-time ownership heights of several years ago, when McDonald’s was a frequent contender as one of the top 30 stocks among hedge funds.
McDonald’s appears to be in the midst of a strong Q4 in terms of same store sales growth, which has been attributed to the company’s rollout of new baked goods, as well as the return of the McRib. Those menu additions are just a sampling of the initiatives that McDonald’s has undertaken recently as part of its new growth strategy, which also includes digital, delivery, and loyalty upgrades, as well as more effective marketing.
1. Starbucks Corporation (NASDAQ:SBUX)
Narrowly topping the list of the best restaurants to buy now is Starbucks Corporation (NASDAQ:SBUX), which was held in the 13F portfolios of 66 hedge funds on September 30. Among the list of prominent shareholders is Bill Ackman’s Pershing Square, Stanley Druckenmiller’s Duquesne Capital, and Ray Dalio’s Bridgestone Associates.
Starbucks continues to expand globally at a breakneck pace, approaching 33,000 locations this year, an increase of about 16,000 during the previous decade. The upscale coffee chain anticipates even greater growth in the decade to come, aiming for more than 22,000 openings by 2030, many of which will be located in China. The company is even tapping into the power of AI to drive future customer growth and retention. Given its impressive growth prospects and enduring brand loyalty, it’s not at all surprising that Starbucks ranks as the top restaurant stock to buy now.
If you’re looking for stocks that could deliver explosive growth in the years to come, don’t miss our article on the 10 Best Tech Stocks To Invest In Right Now.
Disclosure: None.
