It was an all-out food fight on Monday’s “Mad Money,” as host Jim Cramer compared fast food operators Burger King and McDonald’s to determine which stock is the better buy.
In Cramer’s opinion, Burger King is a “terrific trade.” Cramer suspects numerous Wall Street analysts could soon announce positive research coverage on the stock, driving short-term gains. McDonald’s doesn’t appear to have any drivers in the near-term, but Cramer thinks it has a strong franchise with tremendous staying power. MCD also pays juicy dividend yield of 3.2 percent, he said.
“You can put that dividend away, reinvest it year after year and eventually make a ton of money,” Cramer said. “But Burger King has no dividend, which makes it a lousy long-term pick.”
When deciding between these two stocks, though, Cramer said it’s important to also consider one’s appetite for risk. Burger King is in the middle of a big turnaround, so Cramer thinks it comes with a certain amount of risk because who knows how long its transformation will take. McDonald’s, on the other hand, is a nice “low-risk play.”
In the end, Cramer said investors need to decide what they’re looking for.
“If you’re a trader, Burger King is the winner, as you’re going to get roll out after roll out and the analysts who love to get behind a new name with some potential for multiple secondary offerings where you can buy on the cheap, since these owners will want to ring the register,” Cramer said.
“But as an investment, few stocks beat McDonald’s for the long-haul and Burger King is certainly not one of them.”