MINNEAPOLIS ( Stockpickr) -- So now we wait. A nice recovery rally has taken some off some of the sting from the selling, but stocks are still in correction mode. Economic data from here will tell us where we go next.

I'm mostly worried that the negative headlines will become a self-fulfilling prophecy. With such dependence on consumer spending, it is entirely possible that a freeze by consumers similar to a deer in the headlights will do real damage to this fragile recovery. Whatever transpires in the future, I'm pretty certain we all have to eat -- and many of us will do so at a restaurant.

In the spring, I analyzed five restaurant stocks, rating the picks buy, hold or sell. I had Buffalo Wild Wings ( BWLD), a highflying casual restaurant with lots of growth potential, a hold. Shares are up 9% since I wrote the article. I also rated Chipotle Mexican Grill ( CMG) a hold, and that stock is up 25%.

Related: 4 Low-Volatility Stocks for a Volatile Market

Two of my picks in that article were buy recommendations. Upscale steakhouse Morton's ( MRT) is down 14% after getting hit particularly hard by the last few weeks of selling in the market. I also liked Red Robin Gourmet Burgers ( RRGB), which is up 36% since my recommendation.

The one restaurant stock I didn't like and recommended to sell was P.F. Chang's ( PFCB). Shares were expensive at that time, and expected operating performance was only modest at best. The stock is down 37%.

Looking forward and staring down the barrel of a double-dip recession, what restaurant stocks are likely to do well no matter what happens to the economy? Here are five restaurant stocks I would consider.


Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

McDonald's ( MCD) is the safe pick in the restaurant space. Its low-priced fare will do well come rain or shine in the economy. I know I'll take my daughters there from time to time simply because of the great value -- and they have fun too. I haven't caught the McCafe coffee bug, but many have. There is growth to the story in addition to security.

Since July 25, the stock has only lost about 2.8% of its value. That sort of performance in the face of intense fear in the market is admirable. It is also a sign of dependability that investors can count on no matter what the future holds.

Wall Street has McDonald's growing at a more than 10% clip from the current year to the next. Shares trade for a premium at 15 times current year earnings estimates. With a 2.8% dividend, that premium is worth the price to own a stock that should do well no matter what the economy does. I would buy this stock.

McDonald's, one of the top holdings of Renaissance Technologies, which increased its position in the stock by 35% in the second quarter, shows up on a recent list of 10 Top Stocks From S&P Equity.


Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Applebee's and International House of Pancakes, both owned by DineEquity ( DIN), cater to the cash-strapped consumer and should do well should we dip into another recession.

Over the last year, DineEquity has been a bit of a roller coaster. Operating performance has fluctuated from beating Wall Street estimates by a wide margin one quarter to falling far short the next.

In the most recent quarter ended June 30, the company reported a profit of 90 cents per share, missing the average estimate of $1.02 per share by 12 cents. That result stood in stark contrast to the 26-cent-per-share beat DineEquity posted for the first quarter of the year.

Since the start of the year, shares of the company have been up and down, but the correction pushed shares over the cliff. The stock is down 28.6% since July 25. That excessive move relative to the rest of the market is punishment for missing estimates. In response, the company on Monday announced a share repurchase program totaling $45 million. The stock had a nice boost in response that day but surrendered a third of the gain on Tuesday.

With the stock trading for about 9.5 times current year estimates of earnings, I would buy the stock at these levels.

>>Practice your stock trading strategies and win cash in our stock game.

Morton's Restaurant

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Upscale steakhouses would seem to be an unlikely business that would thrive during a recession, but the current valuation of Morton's Restaurant ( MRT) is too attractive to ignore. The stock has been a big loser during the current market selloff. Shares are down 31.8% since the market closed on July 22. Is the stock a value trap or an attractive buy at these levels?

After the last recession, Morton's was on life support. Investors are clearly worried that Recession Part II would be devastating for Morton's business -- which is a reasonable concern. During a recession, many do curtail their indulgences, but the rich tend to keep on spending.

As for valuation, Morton's is quite cheap relative to expected growth. In the current year, the average Wall Street estimate is 48 cents per share in profits. That number is expected to grow by 20% in the following year to 58 cents per share. Investors can buy the stock today for less than 12 times current year estimates of earnings.

The stock is already pricing in a possible double-dip recession, so downside risk is limited. I would buy this stock at these levels.

Darden Restaurants

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

When times are tough, it pays to be diversified. That goes for your investment portfolio, and it also applies to the diversification within an individual company. Businesses that have different offerings tend to fare better during a recession than those that are singularly focused. Darden Restaurants ( DRI) is a diversified restaurant operator with brands that cater to the casual and upscale diner, including Red Lobster, Olive Garden and Capital Grille.

Over the past year, the company has been relatively stable on an operating basis. Profit reports are meeting or beating analyst expectations in each of the last four quarter. Although volatile, shares have been gravitating higher. During the recent selling, Darden has held up relatively well. The stock closed Wednesday down about 9% since the July 22 close.

Wall Street is looking for Darden to earn $3.87 per share in the fiscal year ending May 31, 2012, with that number growing 13% to $4.36 in the following year. Shares trade for just 12 times earnings at current prices.

More important, the company pays a rich dividend yield of 3.5%. A low price and a dividend make this stock easy to buy no matter what happens in the economy.

Darden, one of the highest-yielding leisure stocks, is also one of TheStreet Ratings' top-rated restaurant and hotel stocks.

Tim Horton's

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Prior to the market correction Wall Street rushed to market with several initial public offerings of stock. One of the IPOs was Dunkin Brands ( DNKN), whose July 27 sale was well-received, sending shares zooming above the initial offering price of $19 per share. Despite the sharp selling in the market, Dunkin is still up an impressive 43% from that initial offering price.

Clearly, donut and coffee sales are expected to do well, recession or not. Instead of paying a premium for Dunkin, investors can get exposure to the donut and coffee category of the restaurant space with Tim Horton's ( THI). Today, with several years of operating performance and public stock trading history, investors can buy Tim Horton's based on the numbers instead of the hype.

Tim Horton's has met or beaten average Wall Street estimates in three of the last four quarters. Profits are growing, and shares trade for a reasonable valuation at today's price. Wall Street expects the company to make $2.35 per share in the current year, with that number improving by 17.5% in 2012 to $2.76 per share. Investors can buy that growth for about 19 times current-year earnings.

Coffee and donuts are cheap, and they are addicting. I would buy Tim Horton's in this uncertain environment.

To see these stocks in action, visit the 5 Recession-Proof Restaurant Stocks portfolio.


Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Jamie Dlugosch is a founder and contributor to MainStreet Investor and MainStreet Accredited Investor. Formerly, he was president and CEO of Al Frank Asset Management. He has contributed editorially to The Rational Investor, The Prudent Speculator, Penny Stock Winners and InvestorPlace Media.