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TheStreet Open House

ETFs to Get Your Fill of Fast Food

Stocks in this article: MCD YUM SBUX

NEW YORK ( TheStreet) -- Despite a roller coaster ride in the stock market and uncertainty over the overall strength of the global economic recovery, some fast-food stocks and exchange-traded funds that hold them remain attractive.

First off, as long as the unemployment rate remains north of 9% and employers remain cautious about hiring, consumers will continue to seek discount alternatives. When it comes to eating, fast-food joints will likely be the benefactors of this trend.

One such fast-food chain positioned to reap the benefits of consumer's penny pinching is McDonald's (MCD - Get Report). The Oak Brook, Ill.-based company's emphasis on value contributed to the burger chain reporting double-digit percentage growth in first-quarter revenue and earnings, highlighted by robust sales returning to the U.S. In the U.S., earnings rose 11% and revenue increased 10%. Similar trends were seen internationally, as McDonald's global same-store sales rose 4.2%, with the Asia/Pacific, Middle East and Africa segment gaining 5.7% and Europe increasing by 5.2%.

To further highlight McDonald's attractiveness, a benign commodity environment will help keep costs low and mitigate any needs for near-term future price hikes of goods offered. Additionally, McDonald's utilizes various purchasing mechanisms to keep costs down and predictable, giving them a competitive advantage over competitors. Lastly, from a technical standpoint, McDonald's has outperformed the S&P 500 by nearly 10% and is trading well above its 200-day moving average.

As for the future, the company will likely continue to outperform as it continues to focus on its dollar menu items and plans to expand its higher-end price items by adding frappes and smoothies to its already successful Angus burgers and premium chicken sandwiches.

Another notable mention is the world's largest fast food operator, Yum! Brands (YUM - Get Report), which owns and operates Taco Bell, Pizza Hut, KFC, A&W Root Beer and Long John Silver's. Overall, Yum boasts more than 37,000 outlets and operates in nearly 110 different countries. In the first quarter of 2010, Yum witnessed an 11% increase in revenues and strong growth internationally. In China, the company grew by 23% and continued expanding its presence in the fastest-growing consumer market around the globe. From a technical perspective, Yum is relatively cheap trading around 14.7 times earnings and is well above its 200-day moving average, both enhancing its attractiveness.

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