Restaurant stocks can definitely drive you crazy. On the one hand, there are reasons to believe these can make a tasty long-term addition to one’s portfolio. But we can just as easily make a case for the idea that too many of these are indigestible. Perhaps we can solve the dilemma by seasoning with a dash of fundamental data. (Pardon the puns; I covered the group for a while in the last century while working at Value Line and can’t resist.)
The Case For Restaurant Stocks
People are busy. The idea of sitting down for three square home-cooked means per day is fine for TV Land and other nostalgia-oriented programming services, or for those wealthy enough to have personal chefs. Most of us, however, eat on the go and often eat badly because shopping and cooking take time we can't spare.
So we need alternatives. Eating out is one of them, especially for lunch, when many are least likely to be at or near home and we’re seeing more and more of that for breakfast too. We often have more options for dinner. But who wants to choose home cooking? We aspire to imitate TV chefs, but in reality, we often wind up with home-cooked slop or a plastic container with of sodium garnished with microwaved meat and veggies we bought frozen at the supermarket or convenience store.
So there is definitely a place for restaurants of all kinds depending on one’s tastes and budget.
The Case Against Restaurant Stocks
We live today in a world of choice. We choose how we shop (on line or in store). We choose how we read (paper or screen). We choose how we communicate (too many to enumerate). We choose how we consume entertainment (too many more). We choose how to call for cabs. We choose and choose and choose, and we choose how to eat what we don't cook.