Looking For a Rising Sector to Invest In? Try Restaurants

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By Jacob Maslow

young couple eating outAs the US economy continues to improve and as certain global economies start to recover, one particular sector you should pay attention to is the restaurant sector. Global restaurants stand to gain tremendously as the US economic recovery continues to strengthen. As more and more families dine out and as the total same-store sales of restaurant chains increase, expect the stocks of these restaurant chains to appreciate. Of course, just like with any sector, you should be very careful as to which stock to invest in.

One thing is clear. McDonald’s (NYSE:MCD) is not going to recover anytime soon. Its problems are structural and are partly rooted in the fact that American consumer tastes in restaurant food are changing. It used to be that consumers focused primarily on fast service and low pricing. This is no longer the case. Americans have shown that they would gladly eat out at places that charge a little bit more money as long as the food is prepared better and is made from better ingredients.

With that said, one key player you should pay attention to is Chipotle (NYSE:CMG). This casual dining chain is on fire. Its sales per share are growing and its market appeal continues to grow. Moreover, it is really tuned in to current market perceptions of what constitutes great food.

If you are looking for another fast-growing stock as far as sales per share is concerned, look into Chanticleer Holdings Inc (NASDAQ:HOTR) . This restaurant company has a sales growth per share percentage of 235%. It is definitely growing while its stock price has declined by 69% in a three-year period. Unlike Chipotle which has a rising stock price, Chantecleer looks quite attractive because its stock seems artificially depressed in light of its growth projections. At a March 11 closing price of $2.04, Chantecleer looks quite attractive. Again, you have to look at this stock as a growth stock. Currently, it is losing money.

If you are looking for a company that is making money to buy, look into Chipotle and Red Robin. Red Robin is particularly attractive because of its low price-per-earnings ratio. Expect the restaurant sector to continue to improve as the broader economy continues to expand and solidify.

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