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These food company stocks are a better way to play the Beyond Meat bounce, traders say

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Wall Street still has an appetite for fake meat.

Beyond Meat rose nearly 7% on Tuesday after J.P. Morgan upgraded the meat-alternative stock to an overweight rating, citing valuation after a pullback from its highs.

However, Boris Schlossberg, managing director at BK asset management, isn’t firing up the grill just yet.

“I think the way to play is actually through the retail stores,” Schlossberg said Tuesday on CNBC’s “Trading Nation. “

Beyond Meat has risen over 500% since it’s early May IPO, but has dropped nearly 40% off its late July high.

“My favorite is actually Dunkin’ Donuts, which has been really highlighting Beyond Meat and the Beyond Egg sandwich very well and has also done a very good job merchandising, ” said Schlossberg. “That stock has also been a very strong momentum stock, but I still think it’s the right way to play it because it’s done a very good end-around McDonald’s and Starbucks, and I think it has some very, very strong momentum going forward.”

Ari Wald, head of technical analysis at Oppenheimer, agrees food retailers would be a better play.

“We would prefer the food servers over the food suppliers, and the restaurant industry in general is really broadly strong here when we’re talking about McDonald’s, Starbucks, Wingstop, Dunkin’ Brands, Wendy’s and Restaurant Brands, that’s what we’re looking for, those broad based themes, ” said Wald.

All those names are outperforming the S&P this year, and Wald says Wendy’s is showing signs of relative strength.

“Our analyst recently raised his target to $24 after recent management meetings, and the charts are supportive to really classic breakout here,” said Wald. “The stock got through $18 in April, came back tested that breakout in August, now turning higher again, new high in this mixed market tape, we see that as a sign of relative strength.”

Wendy’s has soared 5% in the past week even as the S&P 500 has fallen 1%. It is up 32% in 2019.

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