There are changes afoot in the Fast Food industry. From USA Today:
Fast-food’s old guard is giving way to a savvy new guard that is slowing-down the process and giving a needed nod to healthier ingredients…
…”Today’s 22-year-olds don’t frequent fast-food like the generation before them,” says Robin B. DiPietro, professor of hospitality at University of South Carolina. “Fast food will have to morph into something fresher and healthier.”
Among the companies that the article suggests are the future of Fast Food: Chipotle (CMG), Panera (PNRA), and Starbucks (SBUX).
Among the companies that are labeled the has-beens: Burger King (BKW), McDonald’s (MCD), Wendy’s (WEN), and KFC (owned by YUM).
Do the technicals match the narrative? Generally, yes. But, not in every case. Dorsey Wright assigns a technical attribute score to every stock, which is derived from the relative strength and the trend of the stock. The attributes range from 0-5, with 5 being the strongest.
Fast Food of the future (per article):
Fast Food of the past (per article):
A technical screen allows us to employ a variation of the old adage “Trust but verify.” The story line makes sense. Some of my own experiences tend to support the narrative that there are indeed major changes taking place in Fast Food, but there are clearly exceptions to the rule. The stocks of some of the old guard are doing just fine, while the stocks of some of those thought to be the future are in fact lagging.
As with all narratives, best to let the technicals filter through the ideas to identify those that are being validated in the marketplace. Change is a constant and relative strength is well-suited to objectively identify when those changes take place.
This example is presented for illustrative purposes only and does not represent a past recommendation. A list of all holdings for the trailing 12 months is available upon request. Past performance is no guarantee of future returns. A relative strength strategy is NOT a guarantee. There may be times where all investments and strategies are unfavorable and depreciate in value.
