These 3 Restaurant Stocks Just Flashed "Buy" on Our Takeover Screen - Buy Them Before Their Rivals Do

If you're like me, you like a big steak.

But what I like more than a sizzling steak are tasty profits.

I'm talking about 100% or 200% gains in a matter of weeks.

That's why I want to talk about restaurant stocks, which are on the verge of generating huge gains in 2018.

The restaurant industry has largely slipped under the radar due to the mainstream media's obsession with tech stocks.

In reality, restaurants offer strong, inexpensive cash flow and access to real estate, and they perform well when Americans are spending their discretionary income.

papa johns

 And while the restaurant industry has been under the same kind of pressures facing brick-and-mortar retail, there are three restaurant firms that have room to run much higher. I don't care how many meal-kit companies, delivery apps, or pop-up burger joints that you throw at them, either.

Most importantly, they're right in the crosshairs of hedge funds, private equity firms, or rival companies that would love to buy them at a fraction of their real value.

That's how we get those juicy profits nearly overnight...

 Top Restaurant Stocks, No. 3: Jack in the Box

 In March 2018, Jack in the Box Inc. (NASDAQ: JACK) sold the Qdoba Restaurant chains to a private equity firm.

Then in December, the company announced it's looking for a buyer in an effort to stabilize its finances. Shares of the stock were off about 20% last year, while the industry's growth was just short of 8%.

That downturn came despite the company's announcement of a $200 million stock buyback last May.

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This has put Jack in the Box in a perfect position for a takeover - one that would be incredibly profitable for shareholders.

The hamburger chain has roughly 2,000 locations.

These would provide a buyer with broad customer exposure across the nation. This would help diversify the portfolio of companies like Inspire Brands or Restaurant Brands International.

Any acquisition like this could propel Jack in the Box's stock to new highs. In fact, analysts believe that JACK could jump from today's price of $80 to $105 with the right stimulus.

That's a 31% gain - a strong return. However, the next top restaurant stock could jump even higher...

Top Restaurant Stocks, No. 2: Papa John's International

 It was a rough year for Papa John's International Inc. (NASDAQ: PZZA).

Shares plunged 42% from their 2018 high following controversial comments from John Schnatter, the company's former CEO.

However, we're moving into territory where a new owner could quickly re-instill confidence, engage in a turnaround strategy, and give the company new life.

According to a Bloomberg Survey of 20 M&A/event-driven trading desks, Papa John's was among the top three most likely firms to be purchased in 2019.

And that's great news for investors. A buyout could send the company's stock rocketing back to its all-time high of $68 - a 61% gain over today's market price of $41.

While that's a great return, my top restaurant stock could shatter those estimates.

It's an operator of some of the most popular dinning chains in the country - and it has much more to offer than both Papa John's and Jack in the Box.

In fact, its assets could multiply shareholder profits exponentially over the next year...

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Top Restaurant Stock, No. 3: Bloomin Brands

Bloomin Brands Inc. (NASDAQ: BLMN) operates casual dining chains such as Outback Steakhouse, Carrabba's Italian Grill, Wine Bar, Bonefish Grill, and Fleming's Prime Steakhouse.

While these are iconic brands, there are two key reasons I expect a deal or at least an effort to break up the company: previous investor demand (and specialty) for dealmaking and the math behind the company's stock.

In 2017, activist hedge fund Jana Partners made a splash after it took a stake in the restaurant operator and pressed for the company to spin off several of its restaurant brands.

In February 2018, the two groups agreed to add an independent board member to its board of directors.

But we haven't seen a major shake-up yet.

Now, Jana has a history here. It was critical in facilitating Yahoo's sale a few years ago.

It was also the firm behind Whole Foods' decision to sell off to Amazon. Jana is notorious for getting investors amped up to break a company up and sell the parts for more than their value.

Bloomin Brands will undoubtedly generate a lot of value if it starts shedding assets.

After all, we're talking about five different brands that could all provide value to different organizations.

Outback - as a brand - could and should operate as its own company. That has been an argument of hedge fund Barrington Capital since February 2018.

Outback has experienced stronger same-store sales than its average industry peer for seven consecutive quarters.

Flemings - which is slightly more upscale - might make an attractive target for Darden Restaurants, the operator of The Capital Grille.

Last year, a Bloomberg analyst projected the combination of Fleming's and Wine Bar would fetch at least $350 million in a deal.

There's even chatter that Bonefish Grill and Carrabba's could be a package deal worth upwards of $1 billion.

With the stock sitting back around $17.89 per share, any acquisition of the above brands could send the company's stock through the roof.

In fact, analysts see the stock hitting $28 a share, a 55% jump.

However, I anticipate that ongoing volatility will see hedge funds with stakes in the firm reignite pressures to sell the company or spin off its assets, unlocking even greater upside for its investors.

With the value of the brands involved here, we could see 100% upside if Bloomin spins them all off. And it looks like we are heading in that direction.

While the time line here remains speculative, we've also uncovered a way to bank reliable returns on a regular basis...

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About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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