McDonald’s crept to a record on Monday, and not for the first time this year.
The world’s largest burger chain and Dow component has hit all-time highs 18 times in 2019, racing 17% higher. A positive July would mark its seventh straight month in the green.
Two other fast-food stocks are serving up some major competition, according to Craig Johnson, chief market technician at Piper Jaffray.
“If we take a look at the chart of Chipotle here, this is a stock that has been in a pretty tight consolidation range, really since about March. It’s now breaking the topside of that consolidation range. and as an individual who looks at charts you’d look at a measured objective probably in the mid-$800s on that particular stock, ” Johnson said on CNBC’s “Trading Nation” on Friday.
A move to the mid-$800s would mark a roughly 16% rally from its current $732 level. The stock has never traded above $800.
“The second stock we’re ordering up is Shake Shack,” said Johnson. “This is a stock that is breaking out to new highs. You’ve just broken out, and you’re seeing confirmation with the relative strength trends also. So, from our perspective this is a stock that we think can move up appreciatively from here.”
A few tailwind themes have coalesced around these fast-food stocks that should continue to fuel their outperformance, says Steve Chiavarone, portfolio manager at Federated Investors.
“The first story is that of the consumer,” Chiavarone said during the same segment. “The consumer has remained strong despite some of the headline noise out there. You’ve got good unemployment numbers, moderate wage growth — maybe a little bit better than moderate wage growth — [and] gas prices have been relatively well behaved. So, overall the consumer is looking healthy.”
Chiavarone adds that a number of these companies are adapting to changing demographics and tastes and their evolution is paying dividends. McDonald’s, for example, has introduced self-serve kiosks, all-day breakfast, and higher-quality ingredients in the past several years.
“They’ve been doing some things to help themselves. So, by and large, we remain positive on the consumer and we think this group can benefit from that,” said Chiavarone.
Fast-food stocks were slightly lower on Monday after rallying in recent days. Chipotle and McDonald’s have added 1% in the past week, while Shake Shack has surged 4%.
