Mr. Market has been on a rampage so far in 2008, and it's no wonder, given the daily (over)dose of news we are all the "beneficiaries" of. My personal favorite was the headline in The Wall Street Journal last week, proclaiming that oil finally hit $100.
If you read a little further, you learned that $100 was reached via a tiny, ceremonial trade, evidently placed for bragging rights, ie. "I made the first $100 trade in oil!" Misleading you say?. I know, "we must sell papers, we must draw viewers". I digress.
I am starting to see some interesting opportunities. On Friday, we took a position (after several years of watching, waiting and sporadic research) in CBRL Group (NASDAQ:CBRL), parent of Cracker Barrel Old Country Store Restaurants. In Peter Lynch-like fashion, we've eaten there many times over the years, never had a bad meal, and always had to wait for a table. We like the fact that CBRL owns 404 of its 565 locations--thats a rarity these days in the restaurant business.
It's no wonder restaurant stocks are getting beat up these days. Ingredient costs are rising, in addition to labor costs (minimum wage), and there is speculation that consumers will stop spending, and in turn, shun dining out. We are still not convinced consumers will pull back to a great degree, and in the event they do curtail spending, we believe Cracker Barrel will continue to attract crowds due to its attractively priced menu. The same can't be said for some of the others playing in the same space that have higher price points.
Cracker Barrel's same store sales came in down 1% early last week; this, combined with a falling market, and overall economic worries have punished the shares to levels not seen since 2002.
We took a position not in the hope of picking the bottom, because we're not adept at doing so, but because we believe the shares are attractively priced.
Previous CBRL Research: February, 2006
Full Disclosure: The author has a position in CBRL. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. The author will not trade any of the securities mentioned (buy, sell, short) for at least two weeks following the date of this post.