If you haven’t already, subscribe to our newsletter here to get our articles directly to your inbox and follow us on Twitter, Instagram, and YouTube! Also join us for our Twitter spaces, every Tuesday we discuss our stock breakdown at 8 PM EST, & Friday we have a Bitcoin Happy Hour at 4:30 PM EST!
Macro Minute:
The previous CPI print was 8.6% year over year for the month of May and it seems like it is not slowing down. Supply chain issues,increased fuel costs persist, housing market booming, food prices increases, and much more. The FED did raise interest 75 basis points which was the largest increase in 28 years, in an attempt to combat inflation. But as outlined above, is this strictly inflation caused by monetary policy? Of course monetary policy plays a major role, but without the shutdowns that have caused massive amounts of supply chain disruptions would inflation be what it is today? I do not believe so. With an impending conflict between China and Taiwan it seems like supply chain issues may persist.
Sector Description: What is the Fast Food Industry?
The fast food industry is an industry that has seemingly defined America for quite some time. Interestingly enough, although the reputation of fast food is unhealthy for consumers, the push for fast food to offer healthy options has continued to increase demand and revenue (see the revenue growth below). As I thought that the COVID dip in revenue would be difficult to rebound for fast food companies, I believe that in an inflationary time fast food may be appealing for consumers as it is generally cheaper than the average restaurant.
Large Public Companies in the Sector
McDonald’s (Ticker: MCD) - Market Cap: $183.3B
Chipotle Mexican Grill (Ticker: CMG) - Market Cap: $37.2B
Yum! Brands (Ticker: YUM) - Market Cap: $32.6B
Opportunities for Broad Exposure
An opportunity to get broad exposure to the fast food industry is the AdvisorShares EATZ ETF. You can learn more about this ETF here.
Key Metrics and Considerations
Increasing Sales excluding 2020: Overall, the fast food industry saw a hit in 2020 due to lockdowns and shut downs. Excluding 2020, the industry has seen growth every single year and I’d look for individual companies to track or even be ahead of growth of the overall sector. Sales and revenue are a key metric that I’ll be looking at to see if that growth is continued and analyze to see if I believe the growth is sustainable.
Embracing Healthy Trend: Although fast food became established over being quick and the healthiness of the food was on the back burner, the trend is starting to shift in the other direction. More people are aware of what they are putting into their bodies and how food can affect them. I believe this trend will continue and although there will most likely be a spot for unhealthy fast food, the healthy options will bring in more customers.
Delivery Increase: Delivery service has increased dramatically since the shut downs were implemented and there has been a slight pullback on the amount of deliveries but the expected convenience is still there. Fast food does not make a significant profit in delivery but the access to more customers is crucial. I look for this sector of the fast food company’s business to be growing.
Financial Stock Data allows users to analyze a company’s financials and qualitative factors such as leadership better than any other platform available. You can use the same tool as the pros for 50% off using our promo code GCI at checkout. Be sure to sign up for Financial Stock Data HERE.
Opinion of Sector
I am bullish on the sector as somewhat of an inflation hedge of sorts in the short term. I believe that consumers will find ways to cut costs and instead of eating out at an expensive restaurant consumers may flock towards cheaper options. With inflation and the massive amounts of brick and mortar fast food businesses in heavy traffic areas, I can see fast food increasing in sales as long as inflation is high.
Video edition: Sunday Scaries Stock Talk
Join us over the next several weeks as we dive into public companies in the fast food industry. Stay up to date on Green Candle by subscribing to our newsletter and following us on Twitter and Instagram! And don’t forget to join us in our Twitter Spaces Tuesday nights at 8 PM EST!
If you’re new to stock investing, check out our introduction to stock investing series:
Have a great week everyone,
Brandon
Disclosure: The article was written by Brandon Keys, and it expresses the author's own opinions. He is not receiving compensation for it. He has no business relationships with any company whose stock is mentioned in this article. The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. Brandon is not a financial advisor. I encourage all readers to do further research and do your own due diligence before making any investments.