The Untouchables

Restaurant stocks as an industry are down 1.68% year-to-date vs a 4% advance for the broader US stock market.  I think I know why – and no, I don’t see any reasons to be getting long here…

The pissing and moaning over commodity prices in the summer of 2007 was epic on every single restaurant conference call I sat in on.  I mean one call was lamer than the next.  When they weren’t blaming the fact that Easter weekend had jumped forward into the quarter it was “high gas prices” this and “high fruit costs” that.  One company said they would have earned money rather than posted a loss for the quarter had they only closed down for one day part!

Fast forward to now: Raw food costs have shot up into the stratosphere and with $90 oil, it would appear that utility costs (a restaurant’s arch enemy) will head higher as well.

I ran a quick screen for some of the restaurant stocks with the lowest operating margins, essentially those I deem most susceptible to the spiking of commodity costs going into the spring.  I’ve also included the debt-to-equity ratios for each and then I colored the spreadsheet purple and pink because, well, I’m a giant girl.

Let’s take a look at one of these just to get a sense of how ugly the stocks look right now.  Below is a chart for Carrols Restaurant Group ($TAST).  This is the parent company of something called Taco Cabana, they’re also the largest Burger King franchisee in the nation…

Ucchhh, I wouldn’t buy this stock for Bin Laden’s rollover IRA.

I’ve not done any deep homework lately on individual restaurant stocks because, to me, names like these become The Untouchables in an environment like this one.

Most of you won’t own these stocks in particular, but you may want to scan your holdings in light of the new raw cost environment and try to get a sense of who might come out with a surprise miss or preannouncement.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Pulse Power rates commented on Dec 15

    … [Trackback]

    […] Find More Info here to that Topic: […]

  2. 토토사이트 commented on Dec 24

    … [Trackback]

    […] Here you will find 2919 more Information to that Topic: […]

  3. fake rolex commented on Jan 01

    … [Trackback]

    […] Info on that Topic: […]

  4. Digital Transformation commented on Feb 03

    … [Trackback]

    […] Here you will find 91667 more Information on that Topic: […]