Although the equities sector recently encountered significant challenges, investors may find long-term upside opportunities in the best restaurant stocks. Naturally, the concept presents a counterintuitive profile consider the rapid rise of inflation. However, the key point to remember with compelling publicly traded eateries is fading coronavirus fears.
Morning Consult provided excellent data points regarding behavioral analytics during and following the Covid-19 pandemic. Notably, a majority of Americans feel comfortable socializing with others in public places. Back in April 2020, only 13% of survey respondents felt comfortable attending a party. Given that the behavioral paradigm shifted, the new normal bodes well for the best restaurant stocks.
Another factor to consider is the return to work. Earlier this year, approximately 50% of companies want their employees back in the office full time. On paper, experts suggest this strategy might fail because impacted workers would be unhappy. As well, the labor market currently runs tight. However, we must also ask: Who signs the checks at the end of the day?
With employers likely to win the “office wars” and most people ready to return to public spaces, below are the best restaurant stocks to buy now.
Easily one of the best restaurant stocks in terms of consumer convenience and value, McDonald’s (NYSE:MCD) presents an attractive profile. Fundamentally and cynically, fast food is addictive. According to Healthline, “The fact is junk food stimulates the reward system in the brain in the same way as addictive drugs.”
Frankly, nobody does fast food better than the Golden Arches. Should the economy take a turn for the worst, consumers will still find a way to reward themselves. One of those avenues for personal rewards could be a trip to McDonald’s.
On the other hand, if the economy does well, McDonald’s stands poised to deliver the goods. With its lightning-quick drive thru networks along with its convenient and intuitive app, the company delivers fast food for the current century.
Plus, MCD stock represents solid value itself, featuring a forward yield of 2.13%. In addition, the American corporate icon commands excellent profitability metrics.
Yum! Brands (YUM)
Cleveland Clinic provided an interesting take on the fast food industry. “Overeating certain foods doesn’t mean you’re a gluttonous or weak-willed person. It means your body has learned to crave junk food. Intensely addictive processed foods can spike your blood sugar, hijack your brain chemistry and drive you to seek out more.”
Speaking realistically and cynically, an addictive underlying product bodes well for Yum! Brands (NYSE:YUM). Love it or hate it, the company truly lives up to its brand messaging. Underneath the corporate umbrella sit compelling eateries like KFC, Pizza Hut and The Habit Burger Grill. It also features Taco Bell, though compelling might not be the best descriptor for it.
Levity aside, Yum! Brands commands an intriguing financial profile, including solid growth metrics and outstanding profitability scores. In addition, the company features a forward yield of 2%.
Though not a pure play among the best restaurant stocks to buy, Starbucks (NASDAQ:SBUX) nevertheless deserves serious consideration. Although people generally prefer remote work, employers may no longer be willing to play ball with their employees. That’s because the paradigm shifted recently.
With the Federal Reserve poised to continue raising interest rates to attack inflation, the economy may enter a deflationary period. That is, instead of the purchasing power of the dollar declining, it may rise. Sure enough, purchasing power did rise (albeit by a tiny margin) from June to July.
Therefore, companies across the business spectrum could see reduced revenues, potentially creating lean times. That’s going to inspire workers to show up to the office to demonstrate value to management. Subsequently, Starbucks could benefit as it returns as a hub for the corporate jockey.
As well, its caffeinated products could act as a coping mechanism for suddenly recalled workers.
Under a similar framework of a possible return to the office, DoorDash (NYSE:DASH) could draw intrigue among the best restaurant stocks to buy. Again, DoorDash isn’t a pure-play idea. Rather, the company specializes as a food-delivery service. During the worst of the Covid-19 pandemic, DoorDash helped keep the lights on for many embattled eateries. Moving forward, it can help worker bees cope with life back in the office.
As more employers issue ultimatums to their employees, DoorDash revenues may rise from individual app users ordering food for lunch. In addition, with full offices come your typical office events: birthday parties, quarterly celebrations, holiday gatherings and what not. Therefore, catering demand could also rise for the delivery service, thus bolstering DASH stock.
To be fair, though, DASH embodies a high-risk, high-reward opportunity. On a year-to-date (YTD) basis, shares gave up 60% of market value. Over the trailing month, they slipped 23%. Still, if employers start cracking down on their return-to-office polices, DASH could be one of the speculative best restaurant stocks.
Ruth’s Hospitality (RUTH)
Back when the Covid-19 pandemic first upturned American society, Ruth’s Hospitality (NASDAQ:RUTH) suffered significantly. Prior to the global health crisis, Ruth’s stood as one of the best restaurant stocks to buy for its underlying premium experience. During the worst of Covid, the inability to socialize badly hurt the nature of Ruth’s business model.
Today, the company stands on much more stable ground. While the firm operates at a higher price threshold than most of its middle-income competitors, the gradual return to normal means more opportunities for special celebrations. For instance, President Joe Biden’s administration prioritized the return of the normal academic year. This translates to more graduations, which then means fancy dinners.
Currently, RUTH is down 13% YTD, which is on the riskier side of the spectrum. However, the benchmark S&P 500 index is down 18% during the same period, just to provide context. So, if you’re a forward-thinking risk taker, RUTH could be interesting.
Dave & Buster’s (PLAY)
As Morning Consult reported, the majority of Americans are comfortable interacting with others in public places. Whether this involves attending a party, wedding or religious ceremony, people have come to grips with the global health crisis. Combined with the potential return to the office, this narrative may bode well for Dave & Buster’s (NASDAQ:PLAY).
Dave & Buster’s historically provided an outlet for happy hours. As well, it allowed workers to let off some steam. From a non-work-related angle, the company also performed well for attracting various sports fans. So, with both collegiate and professional sports back on the field, PLAY could make a comeback.
Enticingly enough, PLAY also represents one of the best restaurant stocks simply on the math. It’s one of the few public securities that is posting a positive return so far this year. At time of writing, PLAY has gained 9% since the January opener.
Darden Restaurant (DRI)
For a balanced take on the best restaurant stocks to buy, Darden Restaurant (NYSE:DRI) presents an intriguing profile. The company features several popular high-profile eateries, including LongHorn Steakhouse, Bahama Breeze Island Grille and Seasons 52. As well, Darden offers budget-friendly family restaurants like Olive Garden.
Fundamentally, DRI stock commands a similar bullish narrative to Ruth’s Hospitality but scaled down for the middle-income crowd. Obviously, the larger volume of middle-income households makes DRI a potentially attractive bet. But another socialization element may factor in here.
According to Morning Consult, a majority of Americans are now comfortable dating. Back in January 2021, only 42% of men felt comfortable while a staggeringly low 24% of women said the same. Now, it’s 62% of women that are comfortable and 73% of men.
Personally, I don’t it’s a stretch that Darden could attract more demand from singles doing the traditional dinner-and-a-movie date. Therefore, DRI should be on your watch list of best restaurant stocks to buy.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.