Watch these two casual dining stocks as group dips this month, traders say

July 22, 2021

Casual dining stocks are trying to claw back from their lows this month.

Big names in the group including Red Robin Gourmet Burgers, Bloomin' Brands, Brinker International, Cheesecake Factory and Dine Brands Global sank in early Thursday trading after notching significant gains on Wednesday as part of a broader market rebound.

For the month of July,

Red Robin is down 16%
Dine Brands is down more than 11%
Bloomin' Brands is down more than 6%
Brinker International is down 7%
Cheesecake Factory is down nearly 5%

Though much of Wednesday's action was likely a ripple effect from Chipotle's earnings beat, the group is certainly "interesting," Joule Financial's chief investment officer, Quint Tatro, told CNBC's "Trading Nation" on Wednesday.

"I think they've been beaten up here with higher input prices and the concern of the delta variant and I think this could continue," he said. "Our play, if we had to choose one … is Wingstop."

Tatro liked Wingstop for its ability to benefit from the reopening as a casual restaurant and from pandemic-related lockdowns as a takeout option, adding that he didn't expect significant declines in takeout trends as the reopening continues.

The company should also benefit from the return of sports, the CIO said.

"I think people are going to be buying those wings," he said. "They don't have any debt, they're trading at a pretty rich valuation, but they've got very little headwinds above as the stock's near all-time highs. So, ultimately, I think our play, if we had to choose one, would be WING."

Bloomin' Brands could also be worth considering, TradingAnalysis.com founder Todd Gordon said in the same "Trading Nation" interview.

"If we look at the chart of Bloomin' Brands, it looks great," Gordon said, pointing to the stock retesting its previous resistance around $25.

Bloomin' Brands fell over 2.5% in early Thursday trading to around $25.44.

"We're coming back to offer support," Gordon said. "It's a good risk-reward profile. I don't own stock, but … I'm interested in looking at it."

With a diversified slate of brands, a big position in hedge funds' portfolios and some recent analyst support, Bloomin' could be set up for a breakout, he said.

"This stock is expected to make about $2.19 a share for this fiscal year. Following the IPO, they were at around $1.57. Just before Covid, they ticked up to $1.85, took a big drop, but they've gone all the way back up," Gordon said. "So, I like the stock and I'll look at adding it to my portfolio."

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