Both Burger King Worldwide Inc (NYSE:BKW) and McDonald’s Corporation (NYSE:MCD)’s recognize that they need to change in order to compete with fast casual and other options for consumers on the go. For McDonald’s this means a wholesale revamping of a menu which has largely remained the same for decades. Sure, McDonalds has offered limited time items, or that frightening annual visit from the McRib, but McDonalds has never looked to change so many items so much in a short time.
It’s for this reason that according to Jonathan Krinsky, Miller Tabak & Co.’s chief technical market analyst, it may be time to buy Burger King Worldwide Inc (NYSE:BKW) shares while looking to short McDonald’s Corporation (NYSE:MCD) stock.
“Each of these trades is interesting in its own right,” Krinsky wrote, “but the pair trade in particular seems to make sense.” The New York-based analyst made share-price estimates of $22 for Burger King and $87 for McDonald’s. If these estimates come to fruition, this would move the ratio as high as 0.253, surpassing a record of 0.213 that was set on June 17. The ratio began the year at 0.186.
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Bloomberg’s CHART OF THE DAY tracks the price ratio between shares of the restaurant since Burger King Worldwide Inc (NYSE:BKW) went public in June 2012 today and it seems to suggest that Krinsky is right in his analysis.
Miami-based Burger King Worldwide Inc (NYSE:BKW), while an icon for decades, has only been traded publicly for 15 months, after a merger with a David Ackman owned company. Burger King is 70 percent-owned by 3G Capital Inc., which acquired the company in a 2010 buyout.
Stock prices of Burger King and McDonald’s
Burger King has enjoyed a rise in its stock price of 20 percent since the beginning of 2013, while Oak Brook, IL based McDonald’s Corporation (NYSE:MCD) who has began offering egg-white sandwiches in the mornings, along with a line of chicken McWraps earlier this year is up 8 percent in the same time frame. McDonald’s also announced that it will begin offering chicken wings in the near future, owing to the success of other wing joints like Buffalo Wild Wings.
The report also showed that what might be helping Burger King Worldwide Inc (NYSE:BKW)’s stock is its scarcity. Out of 351.1 million shares outstanding, only 27 percent are included in the float, or stock available for trading. The bulk of the remaining shares are owned by 3G. McDonald’s Corporation (NYSE:MCD) has about 1 billion shares outstanding, with over 95% of them belonging to its float.