Eight Fast-Food Stocks Trading Near 52-Week Highs

No doubt times are tough for fast-food restaurants as they face higher commodity and production costs. Recently, privately held Sbarro filed for bankruptcy and Goldman Sachs downgraded the sector. Some companies have been able to offset growing costs with strategic price increases, and some, like Starbucks SBUX and Sonic SONC, are experimenting with serving alcohol, which has worked out well for Buffalo Wild Wings BWLD. Yet many fast food chains continue to perform well as cost-conscious consumers try to stretch a buck as they eat out. Here are eight fast-food stocks that are now trading near their 52-week highs. Carrols Restaurant Group TAST: The largest Burger King franchisee in the United States also operates the Taco Cabana and Pollo Tropical chains, but said it plans to spin off the latter two into a separate entity later this year. Analysts on average underestimated per-share earnings in the past three quarters, and the long-term EPS growth forecast is 10%. The stock hit a multiyear high of $10.97 per share yesterday; the share price is up more than 40% year to date. CEC Entertainment CEC: This Texas-based company owns and franchises more than 550 pizza parlors with family entertainment centers under the Chuck E. Cheese banner. The company recently changed its pizza recipe, featuring fresh dough, vegetables and cheese, to accommodate the changing tastes of parents and children. The share price is up about 12%, reaching a multiyear high of $42.71 recently. CEC also offers a dividend yield of about 1%. Chipotle Mexican Grill CMG: Goldman Sachs named CMG as one of its top picks within the restaurant sector, helping to push shares to multiyear high of $329.80. Chipotle sports a strong balance sheet, consistent earnings, healthy cash flow and international expansion, but margins remain under pressure due to food cost inflation. The stock is more than 50% higher year to date, easily outperforming the restaurant industry average and the broader markets in that time. Domino's Pizza DPZ: A new app for ordering pizza from your iPhone or iPod Touch makes Domino's even more convenient. And the company topped consensus earnings estimates in the most recent quarter by 22%, due in part to strong international sales. The share price has risen more than 60% since the beginning of the year. Domino's stock has outperformed competitor Papa John's PZZA and the restaurant industry average in that time. McDonald's MCD: After its burgers came out on the bottom of a national survey, McDonald's has begun testing an “English Pub” burger in some locations. But it is coffee sales and growth in Asia that have been the drivers for the stock. The share price hit a multiyear high of $86.29 yesterday after climbing more than 11% in the past three months. McDonald's has a dividend yield of 1.4% and a return on equity of 34.3%. Nathan's Famous NATH: Nathan's saw 40 new franchised units opened in the past year, including its first two restaurants in Beijing, China. The company also repurchased more than 575,000 of its shares last year. The share price is more than 12% higher than at the beginning of the year and is once again approaching the 52-week high of $19.50 it reached in February. The stock has outperformed the restaurant industry average and the broader markets year to date. Wendy's WEN: It just completed the sale of its troubled Arby's chain to Roark Capital Group. Wendy's says it plans to focus on revitalizing its core menu, modernizing facilities, and global expansion. After trading mostly between $4.50 and $5.00 per share since October, the stock has jumped more than 20% in the past month and reached a new 52-week high yesterday. The company has a 17.0% long-term earnings per share growth rate forecast, as well as a dividend yield of 1.0%. Yum! Brands YUM: Analysts expect the operator of KFC, Pizza Hut, Taco Bell and other popular chains to post year-over-year growth of both per-share earnings and revenues when it reports second-quarter results next week. The long-term earnings per share forecast of 12.9%. And the company also has raised its dividend every year since it was initiated in 2004. Shares opened today about a buck and half south of the recent multiyear high of $57.04. Action Items: Bullish:Traders who are optimistic about the fast-food industry also might want to consider the following trades:

• PowerShares Dynamic Food & Beverage Portfolio PBJ: +10.9% year to date
• Vanguard Consumer Discretionary Index Fund VCR: +10.3% year to date
• PowerShares Dynamic Consumer Discretionary Sector Portfolio PEZ: +10.2% year to date
• Consumer Discretionary Select Sector SPDR Fund XLY: +9.6% year to date

Bearish: Traders who believe that opportunities may be better in the commodities that supply the fast-food industry might want to consider these alternate positions:

• Teucrium Corn Fund CORN: +10.1% year to date
• iPath Dow Jones-UBS Sugar Subindex Total Return ETN SGG: +5.9% year to date
• UBS E-TRACS UBS Bloomberg CMCI Livestock TR ETN UBC: +1.7% year to date

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