3 Restaurant Stocks That Doubled in Value This Year
Now that the end of the year is upon us, it's time to have a look at which restaurant names performed the best in 2013. We're always on the lookout to see if we can pick the next winner. With these three names, had you picked them one year ago today, you would have already doubled your money. Is their run set to continue and will they still be winners in 2014?
This hamburger chain outshines the big boys
Sonic outperformed its larger rivals by a wide margin this year. Shares are up more than 103% in the past 52 weeks. Sonic was one of my picks this year when I wrote about it in "America's Drive-In Is the Place to Be." One of the key things that attracted me to Sonic is its growth potential. Many people have never even heard of Sonic, particularly on the East Coast where the company lacks the presence of its bigger rivals. To increase awareness, Sonic tailored its ad campaign with 70% of all ad-buys now on national cable.
The chain benefited from doing a number of things right this year. A significant driver of sales for the company has been its "Happy Hour" between lunch and dinner. To get customers through its doors, Sonic advertised its 1 million drink permutations and offered all beverages at half-off. This time of the day, when restaurants are typically the slowest, now accounts for about 23% of all sales.
Going forward, it looks like Sonic's run has taken its course. Same-store sales are forecast to grow in the low single-digit range. Shares dropped more than 6% on this news as the market is looking for stronger growth to continue sending shares higher.
This wing company took off
Shares of Buffalo Wild Wings took off this year with a rise of more than 104%. The numbers pretty much speak for themselves as to why shares have risen so much this year. In the most recent quarter, total sales increased 27.9% and net earnings increased 66.9%. I discussed Buffalo Wild Wings' relationship with PizzaRev in an article entitled "Will New Concepts From Chipotle and Buffalo Wild Wings Take Off?"
PizzaRev is looking to do for pizza what Chipotle Mexican Grill did for burritos and tacos. PizzaRev allows you to pick the pizza you want, choose your ingredients, and then see the pizza get made right in front of your eyes in three to four minutes. Buffalo Wild Wings is a minority owner of PizzaRev and will become the pizza chain's first franchisee.
The growth story for Buffalo Wild Wings is still alive and well as the company plans to open another 1,700 locations over the next 10 years. This number doesn't include any expansion outside of the U.S. and Canada, and I see that as where the real potential lies for Buffalo Wild Wings. With the company's growth prospects, I see shares continuing to rise over the long term.
A turnaround at this doughnut chain
Shares of Krispy Kreme Doughnuts rose 114% in the past year, the highest among these three restaurant names. The reason behind this rise was the successful turnaround in its business operations. Krispy Kreme was plagued with many problems. The company had expanded too quickly, and an SEC investigation of its accounting practices led to a management shake-up. Now the company is growing again, and new management can finally say that the turnaround is in place.
One area that didn't need fixing was the doughnuts. The growth strategy is now smaller store fronts catering to retail customers and less on the wholesale market. Where the company is particularly growing is in international markets. The majority of Krispy Kreme's stores are now outside of the U.S. With only 810 locations worldwide, including the U.S., there's plenty of expansion opportunity for this doughnut chain.
Shares of Krispy Kreme still look attractive. The stock is trading at 26 times next year's earnings, and the company has more than $60 million in cash on its balance sheet. With 100 new stores planned for next year, there's still plenty of room for growth at Krispy Kreme Doughnuts.
I still like shares of Krispy Kreme and Buffalo Wild Wings. I think Sonic's stock has gotten a little ahead of itself compared to the company's growth outlook for next year. Sonic still faces stiff competition from its bigger rivals McDonald's, Burger King Worldwide, and Wendy's.
Buffalo Wild Wings remains the No. 1 spot for wings, while Krispy Kreme makes the best doughnuts in my opinion. For Buffalo Wild Wings, I see potential with PizzaRev and there's plenty of room for growth with its core concept. The story is true with Krispy Kreme Doughnuts. While I don't expect either one to double again next year, both should continue to trade higher with plenty of store growth ahead to drive sales.
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The article 3 Restaurant Stocks That Doubled in Value This Year originally appeared on Fool.com.Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Buffalo Wild Wings. The Motley Fool owns shares of Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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