Experts wrong on economy. So go wild
Posted
Dec 07 2007, 02:42 PM
by
Robert Walberg
Rating:
According to the experts, the high cost of fuel, rise in foreclosure rates, decline in the dollar and turbulence in the financial industry has consumers so nervous and scared that they aren't going to spend much money on travel, clothes, food, etc. Today's Reuters/University of Michigan preliminary Consumer Confidence report lent credence to the market's concerns, as the data showed confidence dropping to its lowest level in two years.
But if I've learned anything over the past 20 years it's that what consumers say and how they actually behave are two different things. We might be annoyed by higher gas prices and a little freaked out by the fact that our neighbor just lost his house to foreclosure, but these facts aren't going to turn us into gourmet chefs overnight. Americans are busy people that like their conveniences, and we're not about to turn the clock back 30 years and start cooking all of our meals at home just because some financial geek from Citigroup announced that the company is writing off $11 billion in bad loans.
Granted we might decide to cut back on the big steak dinners and forgo the $70 bottle of wine -- bad news for a company like Morton's Restaurant Group -- but we're going to continue eating out. It's what we do. Over the past 20 years restaurant sales have more than doubled. Two-income families are simply too busy to cook at home all the time, while many young adults don't want to spend the time or effort.
This disconnect between consumer reality and market expectations of consumer behavior creates a good opportunity for long-term investors to get some cheap eats. One stock that looks particularly tasty right now is Buffalo Wild Wings. For those of you who have never dined at one of the company's 440 or so casual restaurants/sports bars, the menu consists of reasonably priced burgers, ribs, sandwiches and of course award winning chicken wings. Dr. Oz might not approve of the menu, but its' the kind of basic stuff that most of us dine on (too) regularly.
Given market concerns, however, the stock is off the high set earlier this summer by nearly 37% -- even though the company is expected to grow earnings by 18% in fiscal year 2007 and by 25% in fiscal 2008. Currently the stock trades at 22 times next year's earnings, or less than one times its growth rate -- a rare discount for a company with a record of strong, relatively dependable growth.
So you can either listen to all the doom and gloom and go out and load up on bottled water, canned goods and shotgun shells -- or do like the rest of us and shut out the ugly headlines by grabbing a beer, watching some football and downing some good old-fashioned chicken wings. And if you have a few bucks left over you might just want to go wild and buy some Buffalo Wild Wings stock. My upside target over twelve months is $38-$40.
