As the historians celebrate the 10-year anniversary of the bull market, things are again starting to look a little dicey after the nice run from the late December lows. With growth slowing almost everywhere except the United States, it makes sense now to start looking for investment ideas that can hold up if the selling starts in earnest again.
One sector that always seems to hold its own is consumer discretionary, especially the restaurants, because despite the market’s ups and downs people still have to eat. A new Baird research report from stays positive on eight top companies, but we whittled that down to the four that should hold up best if things get rough again.
The Baird team said this about the industry:
The early read from our most recent survey suggests February industry comparisons slowed relative to January and fourth quarter levels, with trends likely hampered in part by lagging tax refund activity, some weather issues, and the initial cycling of last year’s consumer tax cuts (lower paycheck withholding’s began mid-February 2018). Looking ahead, we see potential for better trends in March, a scenario that many companies may need in order to achieve calendar- first quarter comparisons and EPS estimates.
Here are four stocks rated Outperform at Baird that look like great ideas for nervous investors. Three of the four are of the fast-food variety, which are usually very strong in bad markets.
It’s time to make the donuts, and it’s likely folks will still be eating them. Dunkin’ Brands Group Inc. (NASDAQ: DNKN), whose brands include Dunkin’ Donuts and Baskin-Robbins, is nearly 100% franchised. Core markets in the United States include New England and New York, while international core markets are South Korea and Japan. Currently operating in over 50 countries, Dunkin’ has significant unit growth potential, both domestically and internationally, with over 20,000 global units.
The company reported fourth-quarter adjusted earnings per share (EPS) that exceeded Wall Street’s expectations. Management also updated the long-term targets given at its Feb. 2018 Investor Day, including now 200 to 250 net new Dunkin’ Donuts stores in the United States per year.
Dunkin’ Brands shareholders are paid a tasty 2.09% dividend. The Baird price target on the shares is $74, while the Wall Street consensus target is $69.88. The stock closed Friday’s trading at $70.74 a share.
Jack in the Box
This is another top fast-food offering for investors to consider. Jack in the Box Inc. (NASDAQ: JACK) operates and franchises Jack in the Box restaurants, one of the nation’s largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Eats, a leader in fast-casual dining, with more than 600 restaurants in 47 states, the District of Columbia and Canada.