If you are like me, when times are tough, one of the areas I try to cut back on is eating out. It’s not easy because even though I love to cook, after a long day at work it’s nice to simply order and before too long have dinner arrive. Easy-peasy, as the saying goes. But when times are tough, or you are simply saving for something or trying to put a little extra money into the stock market, there are only so many corners one can cut — and eating out is one of them.
It seems that many Americans were feeling pretty good about things following the federal government shutdown, because the National Restaurant Association’s Restaurant Performance Index (RPI) hit a five-month high in November. The RPI, a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry, stood at 101.2 in November, the strongest it has been since June. November also marked the seventh month the RPI reading was above 100, which suggests the industry is in expansion mode. Backing that up, 54% of survey respondents claimed they were spending on equipment, expanding or remodeling during the last three months. That spending is positive for companies like MICROS Systems (MCRS) that offer enterprise information solutions for the food industry; Mettler Toledo (MTD) and its weighting instruments that are used in food retail applications; and several payment companies like VeriFone (PAY), Heartland Payments (HPY) and others.
Now that all sounds good, but as I recently shared with subscribers to my PowerTrader trading service, which has delivered triple-digit percentage returns since its launch in November 2012 via a combination of stocks, exchange-traded funds (ETFs) and call options, there is pain ahead for the fast food industry. It is one thing to follow revenues, but as I have learned over the years, it is as important to keep a handle on the cost side of the equation. Even if a company’s revenues are climbing, if its costs are rising at an even faster rate, it does not bode well for earnings generation.
Read more about how you can profit from the coming spike in beef prices at Eagle Daily Investor.