While eating at fast-food restaurants may not be good for your health, investing in them can be great for your portfolio.
People may not be willing to splurge on flat-screen TVs or the latest fashions, but they are still grabbing a burger from the golden arches of McDonald's (NYSE: MCD ) or ordering a pizza from Yum! Brands' (NYSE: YUM ) Pizza Hut. Fast food's speed, low prices, and convenience are very appealing to the beleaguered consumer in this economic downturn.
The proof is in the hamburger patties. McDonald's booked an almost 8% increase in comparable-store sales worldwide, as the fast-food chain benefited from convenient locations, its breakfast business, and extended hours, among other things. McDonald's also benefits from a loyal customer base and scalable business model.
Competitor Yum! also has food in its tummy. The company recently reaffirmed its full-year 2008 forecast of 12% growth and introduced its 2009 outlook of 10% increase in earnings. The owner of Pizza Hut and KFC is banking on the strength of its brands and the penetration of international markets.
You are what you eat
For those who prefer to diversify within the food and beverage sector, the cola kings, chocolate factories, and companies that offer cheaper food items should persevere in this economic climate.
To shop for such hardy companies, I scoured Motley Fool CAPS and used the screening tool to search for companies with:
- CAPS ratings of four and five stars, the highest and second-highest ratings from our CAPS community
- Stocks in the food and beverage industry under the consumer goods sector
Here are some more names in the food and beverage space that have four- or five-star ratings, as rated by our Motley Fool CAPS investor community. (A stock's CAPS rating indicates its potential to outperform the S&P 500.)
During the first 20 months for which we have data, four-and-five-star companies have outperformed the market, with average annualized gains of 7% and 12%, respectively.
|
Company
|
Market Cap
|
Forward P/E
|
Trailing P/E
|
Year-to-Date Price Performance
|
|
Cadbury (NYSE: CBY )
|
$63.5B
|
14.1
|
138
|
(32.7%)
|
|
Coca-Cola (NYSE: KO )
|
$105.3B
|
13.9
|
18
|
(25.1%)
|
|
H.J. Heinz (NYSE: HNZ )
|
$11.5B
|
12.3
|
12.7
|
(21%)
|
|
McDonald's
|
$67B
|
15.9
|
15.1
|
3.4%
|
|
Yum! Brands
|
$13.1B
|
13.9
|
14.5
|
(24.5%)
|
|
PepsiCo (NYSE: PEP )
|
$82.3B
|
13.7
|
15
|
(29.4%)
|
|
Buffalo Wild Wings (Nasdaq: BWLD )
|
$455M
|
16
|
20
|
5.9%
|
|
Campbell Soup (NYSE: CPB )
|
$10.64B
|
12.9
|
9.7
|
(16.8%)
|
You are what you invest
Remember, this should only be the first step in your investment research. To see if you can stomach these food and beverage companies, you should check to see how scalable a company's business model is, its competition, products, and for investing purposes, its valuation. Ask yourself: Does the company have long-term growth prospects? Is it approaching fair value?
Start whetting your appetite for stocks at Motley Fool CAPS today! Let the collective wisdom of our 120,000 member-strong investment community help you make better investing decisions.
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