Buy This, Not That: Hungry for These 3 Restaurant Stocks

Shah Gilani Feb 07, 2024

The food service industry is on track to break $1 trillion in sales this year.

That’s huge… given how dire the sector looked just a few years ago.

But as earnings are served to hungry investors… we’re seeing some customer favorites whipping up tasty treats… while others looking rather stale.

So in today’s Buy This, Not That video, I dig into five popular restaurant stocks.

Despite mixed earnings… one is still a BUY at any price.

Another hit it out of the park… but is looking overbought.

And one could soon benefit from China’s attempt to stimulate its economy… and deliver 25% average annual returns.

Plus… I look at two that have gone nowhere… so don’t contaminate your portfolio with them.

See which are BUYs and which are NOT in today’s video.

Click on the image below to check it out.



Hey, everybody. Shah Gilani here with your weekly BTNT, as in Buy This, Not That.

I want to start off by asking you to send me in more stocks, send me in more sectors, send me in the stuff you want me to address. Because BTNT is about what you’re interested in, not just what I’m interested in, not what I think of a sector or a group or stocks in particular. It’s about really what you want. Whether you are looking at something and want to know whether I think it’s a BUY or NOT, that’s what it’s about. So you can mail me in stocks, you can mail me in sectors, you can mail me in suggestions as to what you want me to touch on in BTNT at

Again, that’s and I’ll be more than happy to look at your stocks and address them in upcoming BTNTs.

This week, a bunch of you sent in bunch of questions about restaurants, the big boys. There were some small ones in there, but some of them were a little arcane. So I’m going to go with the big boys that you guys asked me about.

First off, McDonald’s (MCD). Well… earnings came out and yes, they were somewhat disappointing and the stock, well, it kind of went down a little bit. But McDonald’s to me is a BUY.

You don’t have to buy it down here because I think it could go a little lower, especially if the market sells off a little bit. It’s Wednesday, February 7, here, nearing on 11:30 ET. McDonald’s stock is up 1.69% right now at $289.47. I like McDonald’s, certainly wouldn’t mind buying it here. But I think you can maybe get it lower. But because I like it, I would buy it here and I would add to it a little bit lower for sure. Trading right above its 200-day moving average, which is $283.76, trading at $289 and change.

Now, I like McDonald’s in spite of what a couple of folks were worried about because the numbers were pretty good. But what wasn’t good was that Mideast sales were down. They still had growth, 0.7% growth in their Mideast franchised stores. And that’s okay because we know there’s conflict there, there’s problems there. That’s not the worst thing. U.S. was up more than 4% growth overall. In fact, 4.3% in the US, which is their main market, and the rest of the world all total up 4%. So that’s still good growth in a really mature business that does just really well.

If you look at a five-year chart for McDonald’s, that’s the kind of stock you want to see. That’s the kind of action you want to see. That’s the kind of beautiful ascent toward… You look at a 10-year chart. It’s like, yeah, you want to own a stock that does exactly what McDonald’s has done, and I think we’ll continue to do.

Earnings were good. The growth overall good. The average dip, so I did a little calculation on the average dip over the last five years. The average dip when McDonald’s turned down, it was 23.5%. So if you’re looking at the recent high at, we’ll just call it $300, actually the intraday high $302.39. So let’s say it’s $302. So that’s the intraday all-time high: $302. So if you say, oh, 23.5%, if that’s the average dip maybe I’ll wait down there. But that average dip included the pandemic in 2020 where the stock fell 42%. You take that out and you get three more pretty serious dips. They averaged 17.3%.

So if you want to take a look at buying it a little cheaper, and since it’s a little bit of a down trend here, after the earnings came out, you can look at, let’s go with $302 and I’m going to say 17%, maybe around $250. I would certainly buy it at $250. Certainly buy McDonald’s at $250.

But again, if you owned McDonald’s, I wouldn’t do anything. I would continue to ride it. It’s going to dip and nothing goes up one direction all the time. So McDonald’s is a BUY. I would buy it here. I would buy more at $250. I like McDonald’s. I think you will too.

Next up is Darden Restaurants (DRI). This is a NOT for me. I would not buy this. So DRI today, again 11:30 ET on February 7, up about 1% at $167.55.

Now to me, the stock, it’s just a lot of nothing. Where’s it going to go from here? It does have some substantial dips. I don’t like that kind of volatility. I like what McDonald’s does. I don’t mind the dips at McDonald’s because long-term, you look at a 5-year chart, 10-year chart of McDonald’s. That’s the kind of action you want see. Steady progress higher.

Darden, not so much. You look at a five-year chart of Darden, it has a lot of flatness there. You really going to put your capital into Darden?

Now Darden, as you know or may not know some significant chain businesses, Olive Garden is their biggest. Olive Garden actually accounts for about 42% actually close to 45% really of Darden’s revenue. So that’s pretty big. Olive Garden’s big. Other names you may know Capital Grill, LongHorn Steakhouse. They bought Ruth’s Chris last year for $715 million. Yeah, $715 million. Yard House, a lot of good names.

But overall the stock to me is just not… Here we are at $167 and change and the intraday high $173. You’re going to buy stock here and this high is there when it generally flatlines most of the time? Just not my cup of tea as far as my capital goes. It’s got a 3.1% dividend yield. That’s not enough to entice me into the stock. It’s just not worth my capital. So for me, DRI, Darden Restaurants is a NOT.

Next up, Chipotle Mexican Grill (CMG). Ooh-wee, spicy, especially today. Chipotle Mexican Grill hitting it out of the park with their earnings. While McDonald’s saw a little bit of a slowdown and not the kind of growth that we were hoping for, still positive. Chipotle hit it out of the park every which way.

Every metric was better than consensus estimates. Trading up, it was up about 9% earlier, it’s up about 7.38% now. That’s $183 it’s up. It was up more than $200 a share. Trading at $2,671 bucks right now, up 7.38%. Again, it was up more than 9% a little while ago. So CMG, I really like it. I don’t like chasing stock up here, but you got to like CMG.

Earnings growth up 21%. Revenue growth up 11.3% in the quarter. Net sales up 15.4% year over year. Net income $10.21 versus a year ago 8.02. Solid numbers all the way around. Same story, sales were higher, everything was higher. I’m looking at it there’s nothing that isn’t impressive. So I just really like it.

The problem here is I don’t like chasing stocks that pop like this. I would like to see it come down a little bit. I do not own Chipotle, but I would look at it like a $2,200, $2,300 probably, that’s about 15% but somewhere below where we are now. Is it going to get down there? Only because maybe it got a little overdone going into earnings and then the earnings go, wow, new, fresh, all-time high.

But I hate buying stuff really at these crazy highs when it’s up so much on earnings. If the market comes in a little bit and certainly can because we’re getting a little bubbalicious, I think in some of these names, you could come in, you can buy there. But you’d want to own, I think, Chipotle because it’s bucking the trend for walk-in restaurants. It’s doing really well. And in that price point range, got to hand it to Chipotle. So CMG is a BUY. It’s just a matter of where. Again, really if you said you want to buy it or would you buy it at $2,300, the answer would be yes. That’s what I would do with CMG.

Next up is Yum! Brands (YUM). Now this is Yum! Brands, KFC, Taco Bell Pizza Hut. It’s got lots of great names. But I’m going to put a bit of a kibosh on and say NOT. It’s not a buy. Why? It’s had a nice pop. Had a nice pop today and the earnings were kind of disappointing. For earnings, they were a miss. Stock’s popping today, it’s up 3%. Again, 11:30 on February 7 in the morning, up 3%, $131.

But you look at a five-year chart and this is a lot of nothing. This is not exciting. You look at it on a three-year chart, you’re like, wow, this kind of like… I’m not going to put my capital in there. Not for 2.11% dividend yield, for sure not for that. It’s just not a capital allocation interest to me. I find plenty of other stocks that we would rather put my money into than Yum! Brands. If you own it, put a stop in there. I wouldn’t just sell it, but I would put a stop in there. But it’s already come down.

I mean this stock saw a high of $143, it’s at $131.09. So intraday high $143.25 in May of 2023, and it’s come down and it’s gotten ugly. It got as low as $115 and change in October of 2023. Yeah, it’s bounced from $115 to $113 and change. So what? To me, it’s a not people. Just not worth my capital to buy it.

Last but not least, Yum! Brands China. Yeah, Yum! Brands China (YUMC). Yeah, it’s a BUY. I buy it because it’s something of a falling knife because China has been a mess. But I’ve been talking a lot about China having to do what it has to do to shore up at the economy to shore up their stock market, which has been devastated. And guess what? They’re starting to do it. That’s good. I like it.

Yum! Brands China is up almost 10%. Why? Because all things China. Because people are now focused, starting to focus, what I’ve been saying now for a couple of weeks, maybe a month, going on a month like China, you got to start watching it because it’s ugly as it is looking like you’re going to catch a falling knife. I think that’s going to change because it has to.

So Yum! Brands China trading at $41.19, up 10%. Okay, wow. Talk about a serious pop. Would I chase it up here? You know what? Because I like China, if I bought some here, I would certainly try and average down. I think it’s going to come back down. $35, $36, I would be a buyer. $35, $36. Again, I think this pop is a little bit much, but longer term, I think you can get a nice ride out of Yum! Brands China.

Let’s see, back in April of last year, this stock was at almost $65. So I think you could see a 50% move out of this maybe in a year. 50% move in a year, not a bad play. Even if it took two years to get 50% gain, 25% a year annualized, that’s pretty darn good. So yeah, Yum! Brands China, a bit of a falling knife story, bit of a try and catch the turn story. But I like it because I like China these days. I think China is going to see some action and I think Yum! Brands China is one of the restaurant brands that I would go with.

That’s it for today. Hope you guys are having a great day, and please send me what you’re interested in me talking about as far as BTNT at, and I’ll catch you guys next week.


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