It was a Friday night tradition back in the early 1980s.
After my father got home from work, we’d all climb into our 1982 Oldsmobile Cutlass Cruiser station wagon and head to Burger King for dinner.
To this day, I still remember what we always ordered: My father never wavered from the classic Whopper. My mother was loyal to her Whopper Jr. with cheese with mayonnaise and onions. And nothing pleased me more than a traditional cheeseburger with a side of onion rings.
I know for most folks, this may not seem like a big deal, but I’ll always remember those days fondly.
Of course, these days, you’d be hard-pressed to find me in any fast-food burger joint. For the most part, I just don’t like that kind of food anymore. Not only is most of it ridiculously unhealthy, but I just don’t like how it tastes.
If I need a quick bite, I’m more likely to grab a burrito at Chipotle (NYSE: CMG) or a salad at Panera (NASDAQ: PNRA). And I’m not alone.
In fact, last week after McDonald’s (NYSE: MCD) posted disappointing earnings, a number of analysts chimed in on how fast-food mainstays like McDonald’s were about to lose significant market share to a new wave of healthier and somewhat trendier fast-food restaurants.
Although I personally never eat at McDonald’s, I do think such analysis is flawed. Sure, a new wave of “higher-end” fast-food restaurants certainly increases competition in the sector. But quite frankly, I think McDonald’s has very little to worry about.
In fact, I actually like the stock — and I think it’s a pretty decent dividend play for those not particularly concerned with meteoric growth.
Bargains Reign Supreme
There’s no doubt Americans are enjoying more options in the world of fast food…
From Mexican to Asian to Italian, these days, you can pretty much get anything fast and cheap.
But what defines “fast and cheap” is relative. In other words, there’s still a very real difference between a $7 burrito from Chipotle and a $3 burger from McDonald’s.
The bottom line is that it’s hard to beat McDonald’s on pricing. And given the current state of today’s economy, bargains reign supreme. As my colleague Tom Fischer says, “Owning McDonald’s during tough economic times is an excellent way to profit from the poor.”
Despite the crass nature of such a comment, there is an element of truth to that, no matter how uncomfortable it may be to admit.
Of course, these “bargains” can actually be quite costly if you rely on them for your daily nutritional needs. In such situations, you’ll definitely find yourself using up more sick days and paying for more pharmaceuticals to keep your blood pressure and cholesterol in check.
But in the here and now, when you’re hungry and you don’t have more than a couple of bucks to spend on lunch or dinner, McDonald’s and other restaurants like it will always win out over the more “high-end” fast-food joints.
Don’t get me wrong; the Chipotles of the world have no problem putting asses in the seats. But no matter how you slice it, the market share that so many analysts insist is being hijacked from McDonald’s is so small, it barely registers as an accounting error.
Burgers or Steak?
Fast-food restaurants like Chipotle and the newly public Noodles & Co. (NASDAQ: NDLS) boast some pretty high and somewhat ridiculous valuations.
To be honest, I believe the only thing that keeps them so high is the promise of getting in on the “next big thing.”
But a company like McDonald’s has been a “big thing” for decades. And while you certainly won’t get those massive growth opportunities we’ve seen with some of the newer brands, with McDonald’s, you do get a hell of a lot less less risk — and a nice little dividend to boot.
That being said, not everyone is particularly concerned about safety and security these days, especially with the way the market’s been acting this year…
So if it’s big gains you’re looking for, I suggest ignoring the fast-food sector altogether and focusing on biotechs and energy.
On the energy side of things, well, you know where I stand…
Domestic oil and gas continues to line my pockets, thanks mostly to the continued success of the Bakken and the coming California shale boom.
This will be the trend throughout the rest of the year — and unless you hate money, this is where you need to be right now.
Because come next year, after these stocks have soared into the stratosphere, one thing you don’t want to be is regretful and hungry, searching out the nearest fast-food restaurant for a $0.99 hamburger… instead of dining on a grass-fed porterhouse and a glass of 2011 Patricia Green Pinot Noir.
To a new way of life and a new generation of wealth…
Jeff Siegel
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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.
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