The broader market has resolved its range to the upside led by several groups, among them consumer discretionary, which is hitting all-time highs on an absolute basis and also relative to the consumer staples sector. Within the consumer discretionary group, the restaurant industry continues to deliver strong returns.
One example is Texas Roadhouse, Inc. (TXRH), which is up 20% year to date on top of an already massive gain of approximately 1,300% from its 2008 lows.
To show how broad based this rally has been, I want to highlight two stocks on the opposite ends of the spectrum, Denny’s Corporation (DENN), the breakfast chain, and RCI Hospitality Holdings, Inc. (RICK), the owner/operator of nightclubs.
Denny’s stock has been in a strong uptrend since breaking out in late 2013 and broke out again earlier this year after consolidating for the majority of 2015-2017. Now that prices are retesting the breakout level, we want to be buyers of this weakness and look to take profits up toward $22.50. With that said, if prices break below $13.80, a more neutral approach is best. (For more, see: How to Analyze Restaurant Stocks.)
RCI Hospitality Holdings is a smaller-cap name, but the point here is that it’s part of the higher-end discretionary space and is also breaking out to new all-time highs after spending the past 10 years making no upward progress. As long as prices are above the 2008 closing highs of $28.50, the bias in this stock remains to the upside, with a price target at $46.90.
The theme here is that, whether you’re interested in $4.99 pancakes or $499 bottles, both stocks are just off all-time highs and look poised for further gains. This shows strong participation within the restaurant industry of the consumer discretionary sector.
For access to a list of the rest of the restaurant stocks we want to buy, start your risk-free 30 day trial of All Star Charts today.