Is junk food healthy for your portfolio?

August 27, 20196 Comments

A study from The Physiological Society, shows that junk food can lead to many health problems including kidney damage on par with diabetes. Yet, amazingly, many fast-food outlets are considered “consumer staples”. I argued this point with resident CFA Craig Aucoin here at ValueTrend. How can a high fat hamburger & fries on white bread be considered a “staple”?

Well, to many of us, they are not staples in our lives – but to many others, they are a lifestyle staple. These companies have  benefited from a very dedicated and unwavering crowd of regular patrons (and the corresponding cash flow). The bigger fast-food chains are  making their customers fat and unhealthy, while their shareholders’  simultaneously earn healthy, fat profits. This, in the face of a stock market that seems to be facing some lean times right now. Perhaps the charts below will help convince you to add some low nutrition food into your portfolio’s diet.

Wendy’s: Nice breakout!

Chipotle: Post food-poisoning rally

Wingstop: Flying high

McDonalds: Big Mac Attack

Restaurant brands: Weak coffee, fatty chicken & Whopper performance

Yum brands: So many ways to indulge

Dominos: A stock that’s had its topping. The only bad news of the group


  • Well, these charts are serving up some good returns. There has to be at least one with a cup-with-handle. Sorry, I couldn’t resist the temptation to keep the food puns going.

    I can understand the outperformance of some of these in this environment given that the strength of franchises is that their results can be replicated in different geographies, including half way around the world. Consumers like them because their food is predictable (some would say predictably bad) and investors seem to think their revenue and earnings are predictable, too.

    What about you, Keith? Do you think some of these names will continue to be safe havens in a volatile tape? Is there a restaurant ETF that looks (and smells) appealing now?

    • Good input Paula–and yes, their replication of food is what drives people to go there. I’ll admit that if i am travelling in the USA–I will sometimes go to one of these horrid places instead of risking food poisoning from an unknown entity (I do try to get a salad or something that represents actual food). So there ya go.
      I don’t know of any Fast Food ETFs….. Anybody?
      Perhaps the diversified plays like YUM or QSR are a little like an ETF–YUM in particular is pretty diversified. Ya get yer deep fryers, yer pizza, yer Americanized Mexican–all the food groups!

  • You left out A&W which is decidedly not performing well these days (off 13% since its high on May 15th). This brings up a question I have: on the weekly charts, when the 10 week MA moves too high in comparison to the 50 week MA, a correction slight or great, will occur. This actual level will vary from equity to equity. Do you place any credence to that?

    • Yes, I left a few off the list for space savings Fred. As far as MA’s–the biggest rule I have is the % over the 40-week rule–if its > 10% over the 40 week (200 day SMA) I feel things are overbought.


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