Casual-dining stocks have been out of favor much of this year. But a rash of acquisitions by private-equity groups in recent months has investors taking another look at the sector.
Some of the older casual-dining chains have gotten a nice bump on takeover speculation, though the newer ones are still largely out of favor.
Still, some investment pros think you might be better off focusing on overlooked newer chains with solid growth potential.
"I think you could make some money in the growth stocks," said Michael Smith, an analyst at Oppenheimer. "It seems they are the ones neglected in terms of price valuations."
Smith cited Cheesecake Factory, BJ's Restaurants and Panera Bread as examples. Smith owns shares of BJ's Restaurants, the operator of BJ's Roadhouse.
Money in Buyouts
Investors have still made money in older chains that have attracted buyouts. Even in the midst of a slowdown in casual dining, private-equity firms see older restaurants as strong cash generators with valuable real-estate assets.