As volatility rocks the market, one group of stocks is sizzling — fast food.
Stocks like Starbucks, Jack in the Box, Chipotle and McDonald’s are outperforming in the past month. Of that selection, Chipotle shares look best positioned, according to Craig Johnson, chief market technician at Piper Jaffray.
The firm’s analyst covering Chipotle, Nicole Miller Regan, is one of Wall Street’s biggest bulls on the stock. In a note to clients last week, she said restaurant stocks are “back in favor.”
As for the performance chart, Johnson noted that the stock is successfully bouncing from its 40-week moving average, and that’s a bullish signal. A close above $500 per share would open the door to a new leg higher. Chipotle is currently trading around $471.
Starbucks, meanwhile, is a weaker food stock within the group. Shares have become over-bought in the near term, Johnson said, and he’d consider the coffee chain as a name to sell.
It should come as no surprise that fast food and fast casual stocks are on the rise because the group tends to trade like defensive consumer staple names in times of market turbulence, said Gina Sanchez, CEO of Chantico Global.
“This low end becomes something that you hide out in because you know people can afford this stuff,” Sanchez said Wednesday on CNBC’s “Trading Nation.” “I think if you look at valuations, Chipotle is a stock that has been loved, and its valuation reflects that. It’s [trading at] 75 times trailing earnings. But the expectations continue to be positive. So maybe it can continue to grow into that.”