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Three Restaurant Picks for Your Portfolio


If people are going to dine out, they're likely to eat here.

When hunger pangs strike, it's no surprise that Americans prefer staying in rather than dining out as this struggling economy tries to find its footing.

And, as everybody knows, the restaurant industry -- comprising fast food, casual dining, and upscale chains -- is facing very tough times. Indeed, this week the Fed released its Beige Book and highlighted those sectors reported to be on a weakening trend: commercial real estate, transports, hotels/tourism, advertising, coal, energy production, and -- you guessed it -- restaurants.

However, despite the industry facing the brunt of the economic downturn, analysts at Zacks Equity Research believe there still are defensive stocks in the industry that represent compelling long-term growth opportunities.

What are they?

For one, McDonald's (MCD) still looks appetizing, say the analysts. The Oak Brook, Illinois-based company reported third-quarter earnings yesterday that beat the Street's forecasts, and investors moved in: The stock jumped 2.01%.

The burger chain's "consistent earnings and healthy balance sheet provides relative safety and moderate growth in a turbulent environment and exposure to faster-growing international markets," the analysts write.

For traders, we asked Michael Paulenoff, author of, for some advice.

"From my perspective, unless and until McDonald's hurdles and sustains above $61.00, price will be range-bound between $55 and $60 for the foreseeable future," Paulenoff says.

Writing on the Buzz after the company reported, Jeff Macke noted that, with the move towards $60, he sold a Super Sized percentage of his McDonald's.

Macke added, "I'd like to reload in the mid-$50's if and when but I have to stay on my toes to get it."
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