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Three ETFs for Fast-Food Fans

By Kevin Grewal, Editorial Director at www.SmartStops.net

NEW YORK ( TheStreet) -- As consumers around the world continue to opt for choices that don't break the bank, some fast-food eateries remain attractive and for good reason.

Most recently, the most well-known fast-food franchise in the world, McDonald's (MCD - Get Report), reported that same-stores sales are on the rise. The retailer stated that sales at restaurants open for at least one year increased 4.8%, marking the largest one-month gain in nearly one year.

Domestically, analysts suggest that the gains may be attributed to McDonald's dollar menu, which recently expanded to include breakfast items, and promotional items boosted by the Olympics. The company is expected to continue to gain share against its competitors.

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To further give the Oak Brook, Ill-based fast-food giant a boost, international markets witnessed an exceptional uptick, with the Asia Pacific, Middle East and Africa regions seeing the highest gains of over 10%. Additionally, sales in Europe grew by more than 5%, primarily driven by jumps in France and the United Kingdom.

A second fast-food chain that has been performing well is Yum Brands (YUM - Get Report). This popular fast-food parent company, which includes Taco Bell, Pizza Hut and KFC, offers cheap food and has a large store base, which makes it easy for consumers to reach. Additionally, YUM has beaten Wall Street's expectations in each of the last four quarters and is trading around 14 times earnings, making it relatively undervalued. Lastly, YUM has the largest fast-food chain presence in China, which is expected to be the fastest-growing consumer market in the coming year.

Domestically, the economy is far from being mended and consumers remain cautions, meaning that cheaper alternatives will continue to reap the benefits. Internationally, the middle class in emerging nations is growing at exponential rates and is being introduced to the Western way of life, which includes eating at restaurants like McDonald's and any of the YUM Brand subsidiaries.

A good way to gain access to both of these fast food giants includes:


  • PowerShares Dynamic Food & Beverage (PBJ), which allocates 4.9% of its assets to MCD and 4.8% to YUM. PBJ closed at $15.18 on Monday.
  • PowerShares Dynamic Leisure & Entertainment (PEJ), 4.7% allocated top MCD and 4.7% to YUM. PEJ closed at $14.80 on Monday.
  • Vanguard Consumer Discretionary ETF (VCR), which boasts MCD as its top holding and allocates nearly 1.3% of its assets to YUM. VCR closed at $50.34 on Monday.

Although an opportunity exists in these equities, it is important to keep in mind the inherent risks involved in investing in equities as well as the impact that an unstable labor market can have on consumer discretionary spending.

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SYM TRADE IT LAST %CHG
MCD $98.90 0.00%
PBJ $31.38 0.00%
PEJ $37.91 0.00%
VCR $122.59 0.00%
YUM $81.11 0.00%

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DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

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