CNBC’s Jim Cramer is always on the hunt for strong secular growth trends, and lately, he’s been eyeing one that he just can’t seem to brush off: protein and millennials’ obsession with it.
“I know this sounds silly. They made fun of me on ‘Squawk on the Street’ when I said it. ‘They like protein.’ I know, it’s been kind of a staple for millions of years,” the “Mad Money” host said. “More important, aren’t millennials supposed to be going vegan or vegetarian at alarming rates?”
“As it turns out, the younger generation does love protein, and the one they really love is chicken,” Cramer continued. “I think millennials are so image-conscious — well, of course, they’re Instagramming each other — that they’ll do anything to avoid eating carbs, including going full carnivore.”
Cramer believed in this trend so much that he attributed two high-profile deals — Roark Capital taking Buffalo Wild Wings private and Burger King parent Restaurant Brands buying Popeyes Louisiana Kitchen — to its dominance.
“One chicken chain getting acquired [might be an] isolated incident, but two? I think two’s the beginning of a pattern,” Cramer said, pointing to an Axios story that reported Roark subsidiary Arby’s has more acquisitions planned.
The “Mad Money” host added that the “poultry bull market” has more players in it than just restaurants.
Shares of Tyson Foods, a Cramer-fave food distributor specializing in chicken, beef and pork, have been running thanks to the company’s poultry business, he said.
Tyson’s management has helped by adopting millennial-friendly initiatives like selling antibiotic-free chicken and embracing sustainability. In turn, the company has been seeing increased demand for chicken with no signs that it will stem in 2018.
Cramer didn’t want investors to overthink investing in the protein bull market, though. He still liked the stock of Tyson because the company’s fundamentals are still improving.
On the restaurant side, Cramer liked the stock of Wingstop, a chicken-wing-focused chain that, in a rare move for restaurant chains, is still putting up new stores.
But the stock’s strength couldn’t be denied. Wingstop trades at 50 times next year’s earnings estimates, a pricey multiple compared to its 17 percent long-term growth rate.
“And I don’t expect it to be taken private,” Cramer said. “After all, Wingstop used to be private. Guess who owned it? Roark Capital, the same guys who just bought Buffalo Wild Wings, until the IPO in 2015. Those guys still own 20 percent of it, so it’s not going to get a takeover bid.”
The other big public player in protein is Yum! Brands, the parent company of Pizza Hut, Taco Bell and KFC. With a stock up over 30 percent for 2017, Cramer pointed to Taco Bell and KFC as its main drivers.
“What can I say? People can’t get enough protein. But Yum trades now at 26 times next year’s numbers,” he said. “This one isn’t cheap anymore.”
Still, even though it wasn’t his favorite, the “Mad Money” host gave investors his blessing to buy shares of Yum, particularly on a pullback, because of its savvy management.
“Here’s my bottom line: it may sound like a silly thesis and people laughed initially, but protein is red-hot, I think because image-conscious millennials are desperate to avoid eating carbohydrates,” Cramer said. “The best way to play it? Stick with Tyson Foods. Yum’s worth holding. Wingstop could be attractive into weakness. Tyson is a buy, buy, buy.”