A few restaurant stocks traded near new highs this week, but the “Fast Money” traders thought one company stood out.
“I’d rather play Yum! with the exposure in China than gamble on it here,” said Stephen Weiss of Short Hills Capital. “It’s also a very, very crowded space and they’re finding it increasingly difficult to differentiate themselves in terms of what they’re offering.”
Yum! Brands and Brinker International set new 52-week highs Tuesday.
Weiss, who was bearish on China in general, pointed out the seeming contradiction in why he liked eateries.
“Now you’ve got more than half the population living in the cities in China, and that migration’s going to continue,” he said. “That’s different than builders going out and trying to build more buildings when you’ve got excess real estate and prices coming down.”
Mike Murphy of Rosecliff Capital agreed.
“Yum, I think the exposure to China is great, but other than that, a lot of them have run up a little bit too much for me,” he said.
Trader Zach Karabell noted potential headwinds included price increases in grain and meat commodities.
That wasn’t enough to dissuade Joe Terranova of Virtus Investment Partners.
“It’s the right move off of China to be long Yum,” he said, but also pointing out another related play with potential off its highs.
“If we get into a little bit of a difficult environment and a correction in the marketplace, you’re going to see a lot of investors flock back to the safety of McDonald’s,” he said.
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Trader disclosure: On Feb. 22, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Terranova is long VRTS; Terranova is long MCD; Terranova is long EMC; Terranova is long IBM; Terranova is long OXY; Terranova is long HPQ; Terranova is long SBUX; Terranova is long SWN; Terranova is long MSFT; Terranova is long YUM; Terranova is long TBT; Terranova is long FXE; Terranova is long LPX; Terranova is long LQD; Terranova is short GOOG; Weiss is long HPQ; Weiss is long EUO; Weiss is long MOS; Weiss is long WLP; Weiss is long QCOM; Weiss is long HK; Weiss is long KEG; Weiss is long HAIN; Weiss is long VZ; Weiss is long SVU; Weiss is long BK; Weiss is long CHK; Weiss is long SMND; Weiss is long RIMM; Weiss is short ANR; Weiss is short MT; Murphy is long M; Murphy is short JCP;
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(HPQ): Neither ISI nor its affiliates beneficially own 1% or more of any class of common equity securities of the subject companies referenced in this Report. No person(s) responsible for preparing this report or a member of his/her household serve as an officer, director or advisory board member of any of the subject companies. Neither ISI nor its affiliates have any investment banking or market making operations. At various times these reports mention clients of ISI from whom ISI has received non-investment banking securities related compensation in the past 12 months.
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