Five Fast Food Stocks to Buy Now

The introduction of the breakfast menu has cranked up the competition in the fast food business. Recent trends have shown that customers place great value on convenient breakfast, one that would require very little effort to get up and clean up afterwards. Fast food chains were quick to pounce, offering a wide range of offers. For some of them, sales generated by breakfast menus have come to account for a quarter of their overall revenue, thus proving to be an instant hit. Let’s have a look at some of the most popular fast food stocks and find out which of them hedge funds like best.

We determine hedge fund sentiment by analyzing the equity portfolios of some of the best-performing hedge funds and institutional investors. Through extensive research, we have determined that the due diligence that these investors employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also shown that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).

One of the most popular stocks among the hedge funds we follow, McDonald’s Corporation (NYSE:MCD) was held by 84 funds from the Insider Monkey database at the end of the fourth quarter, up from 75 a quarter earlier. Doug Silverman And Alexander Klabin‘s Senator Investment Group is bullish on McDonald’s Corporation (NYSE:MCD), having initiated a position during the quarter and amassing 1.5 million shares valued at $177 million according to its latest 13F filing. Rob Citrone’s Discovery Capital Management is also optimistic about the prospects of the company, having boosted its stake by 6% to 1.78 million shares worth $210 million at the end of December. McDonald’s Corporation (NYSE:MCD) has recently stepped up efforts to become more mobile-friendly, as it is preparing for the launch of an app that would take the company’s loyalty program to a whole new level. In addition, with the introduction of the all-day breakfast proving to be a great success, McDonald’s is now looking to expand its breakfast menu in the hope of a bump in sales.

Starbucks Corporation (NASDAQ:SBUX) also gained a vote of confidence during the quarter, as the number of long hedge fund positions rose to 61 from 54 at the end of the third quarter. John Burbank sees great upside potential for the specialty coffee company, having boosted his investment to approximately 1.8 million shares by the end of December. Jim Simons‘ Renaissance Technologies, having reported a new position that contained 1.38 million shares at the end of 2015. Arguably the hottest fast-food company at the moment, Starbucks Corporation (NASDAQ:SBUX) shows no signs of slowing down. The company is pressing on with its expansion plans, as the recent results show great growth potential. The company reported a 9% increase in sales for the 2016 fiscal first quarter, having opened 171 new stores in the U.S. alone. Starbucks Corporation (NASDAQ:SBUX) is also investing heavily in Europe and Asia, with China being its second largest market outside the U.S.

The popularity of Chipotle Mexican Grill, Inc. (NYSE:CMG) also received a boost, with the number of hedge funds invested having increased to 39 at the end of December, from 28 at the end of the third quarter. The stock has recently entered a downtrend, after news emerged that the restaurant chain is heading towards as first ever quarterly loss as a public company. Chipotle Mexican Grill, Inc. (NYSE:CMG) said February sales fell by 26% year-over-year, while March sales were down by 22%. As a result, analysts slashed their earnings projections, now expecting 2016 earnings to range between $5.25 and $6 per share. Tiger cub Andreas Halvorsen is betting big on Chipotle Mexican Grill, Inc. (NYSE:CMG), having initiated a stake during the fourth quarter that rose to 689,383 shares valued at more than $330 million. Jim Simons’ Renaissance Technologies, on the other hand, reported 305,800 shares, down by 37% on the quarter.

Hedge fund sentiment towards Restaurant Brands International Inc (NYSE:QSR) remained unchanged over the quarter, with 29 funds among those tracked by Insider Monkey having reported a stake in the company in their latest 13F filings. Together, these funds hold roughly 38% of the company’s common stock as of the end of December. Billionaires Warren Buffett and Bill Ackman are keeping tabs on Restaurant Brands International Inc (NYSE:QSR), with both of them holding sizable positions in the stock. According to their respective 13F filings, Berkshire Hathaway held 8.44 million shares at the end of the fourth quarter, while Ackman’s Pershing Square reported ownership of more than 38 million shares. Restaurant Brands International Inc (NYSE:QSR)’s stock has inched up by around 7% year-to-date and is currently trading at a trailing Price to Earnings (P/E) ratio of 78.46, double the industry average of 38.60.

At the end of December, roughly 12% of Yum! Brands, Inc. (NYSE:YUM) common stock was held by 51 funds from our database, down from 65 at the end of September. Although the stock ended 2015 slightly down, it was up by more than 30% by mid May, before plummeting back to the $73 level. Analysts at Longbow Research have recently initiated coverage of Yum! Brands, Inc. (NYSE:YUM) and have assigned a ‘Buy’ rating and a price target of $95 per share, which represents a premium of 20% over yesterday’s closing price. Oppenheimer has recently reiterated their ‘Outperform’ rating an have slightly reduced their price target to $87 per share. As opposed to other hedge fund managers, Keith Meister‘s Corvex Capital used the opportunity to buy the stock on the low in the fourth quarter, having increased its position by 5% to 21 million shares valued at 1.53 billion. Cliff Asness’s AQR Capital Management is also bullish on the stock and has boosted its position by 221% during the quarter to 3.13 million shares of Yum! Brands, Inc. (NYSE:YUM), worth $229 million at the end of December.

Disclosure: none