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10 Restaurant Stock Winners of 2010

Stocks in this article: DRI YUM CAKE PNRA TXRH DPZ RT BJRI DIN CMG CBRL EAT PEJ PEZ PBJ SPY ^GSPC

(Restaurant stock winners of 2010 article updated with broker action on Chipotle.)
NEW YORK ( TheStreet) -- Stocks in the restaurant sector mostly moved higher in 2010, but even as the sector rode the overall market recovery a group of restaurateurs clearly stood out as the year's industry winners.

Affluent Americans returned to their spending ways in 2010 as consumer confidence worked to regain its footing, said Stifel Nicolaus analyst Steve West.

>>Restaurant Stocks: Earnings to Watch

The PowerShares Dynamic Leisure and Entertainment Portfolio (PEJ), PowerShares Dynamic Consumer Discretionary Sector Portfolio (PEZ) and PowerShares Dynamic Food & Beverage Portfolio (PBJ), exchange-traded funds that count restaurant stocks as at least 10% of their portfolio, soared 37.4%, 27.9% and 27.6%, respectively, so far in 2010. By comparison, the S&P 500 rose just 8.2% in the same time period with the SPDR S&P 500 (SPY) gaining 8.9%.

That trend boded particularly well for restaurants in what West calls the "upper-mid-scale-casual" segment in 2010. Restaurant chains like Chipotle Mexican Grill (CMG), Panera Bread (PNRA) and Cheesecake Factory (CAKE) grew revenue by 19.7%, 13% and 3.4%, respectively, in the first three quarters of the calendar year. Fourth quarter sales are expected to show another 20.5% year-over-year bump at Chipotle, a 13.7% increase at Panera and 4.3% at Cheesecake Factory.

That's because those mid-level restaurant concepts cater to a broader base of consumers, West told TheStreet, as opposed to most fast food chains -- industry lingo calls them quick-service restaurants, or QSRs -- which appeal mainly to minorities and people in the 18- to 25-year-old range, demographics disproportionately affected by high unemployment .

"The Holiday season has a way of focusing the market's attention on the state of the U.S. consumer, and the development of consumer confidence and spending in 2011 will be a key driver of equity prices," said Nicholas Colas, ConvergEx Group chief market strategist.

Data released Nov. 30 showed that consumer confidence among Americans pushed up to its highest level in five months in November .

"Consumers' assessment of the current state of the economy and job market, while only slightly better than last month, suggests the economy is still expanding, albeit slowly," said Lynn Franco, director of The Conference Board consumer research center. "Expectations, the main driver of this month's increase in confidence, are now at the highest level since May. Hopefully, the improvement in consumers' mood will continue in the months ahead."

>> Consumer Confidence Gains in November

With all this in mind, here then is a rundown of 2010's best-performing restaurant stocks. We limited the list to companies with market caps of at least $500 million, ranked by share price percentage gains, from good to great.

(Data is based on closing prices on Dec. 1, 2010.)



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