Wisdom, a Genuinely Risky Topic
American Spending: Restaurants vs. Grocery Stores
A Restaurant Stock with Momentum
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Today, I’m going to tackle a genuinely risky topic: wisdom. The value of wisdom isn’t controversial. Everyone likes the idea that meditation on life’s experiences (and their meaning) can produce pearls of insight and advice that will stand the test of time.
Tim Lutts, Cabot’s capo di tutti capi, even signs off each Cabot Wealth Advisory he writes with “Yours in the pursuit of wisdom and wealth.”
But there are a couple of problems with wisdom, the biggest of which is that one person’s wisdom is another person’s hogwash.
After a long life spent more in the pursuit of wisdom than wealth, I cannot think of a single pearl of wisdom that everyone agrees on. And the more obvious any particular pearl appears to someone, and the more central it is to that person’s interpretation of the universe, the wilder and more derisive the response it will get from those who don’t share it.
And then there are people who reject the whole idea of wisdom altogether. They don’t give a rat’s patoot for any attempt to make sense of the world. Some of them are like Jeff Foxworthy’s description of what guys are thinking about all the time: “I’d like a beer and I’d like to see something naked.” (And if you think indifference to wisdom is totally a guy problem, you haven’t been paying attention.)
At this point, I believe that the only way to get wisdom into some people’s heads is to write it on a ten-penny nail and hammer it there.
But I digress.
I guess the idea of wisdom is on my mind right now because as of today, I’ve been at Cabot for 10 years. And for many of those years, I’ve been the editor of Cabot Wealth Advisory, which is a position that demands that I try to communicate what Cabot’s approach to investing is all about.
And to communicate Cabot’s philosophy, I have to know what it is and then boil it down to as few words as I can and still get the point across.
At this stage of my career, if I can’t tell you what Cabot believes, I shouldn’t be doing this.
So here it is, a short set of short observations about what Cabot is all about.
That’s about as short a presentation of Cabot’s business philosophy as I can write. I hope that sounds like wisdom to you.
As for my personal philosophy, I strive to keep in mind that no matter how much I know about the little tide pool of knowledge I hang out in, the ocean is a vast mystery.
But my curiosity remains strong. The stock market is just one of the topics that tempts me every day into further exploration. Even after a decade at Cabot, I hope to go on learning for a while yet. The stock market is a strange and wonderful place; no one ever learns all its secrets, but it’s worthwhile to try.
And I still have a hunger for wisdom, and think I’ve found a few nuggets over the years. If you spend enough time on the highway of life, you’re likely to find a few bumper stickers to believe in. At least that’s the way it looks to me.
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Apple’s $16 Billion Secret
Forget what you’re reading in the financial media about China’s great growth machine slowing down.
Apple just reported a $16.1 billion windfall in China sales in January.
And Apple is not the only company that’s investing in China. Microsoft is investing there, McDonald’s is investing there and Kentucky Fried Chicken is investing there, along with IBM, Caterpillar, Ford, Mercedes and Las Vegas Sands—all to grab their share of profits from the rise of China’s consumer spending.
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My stock recommendation today is motivated by a news story I found online recently that snapped my head back a bit.
Since 1992, the U.S. Census Bureau has been keeping track of how Americans spend their money. And there have been some big changes.
In 1992, people in the U.S. spent $162 in grocery stores for every $100 they dropped in restaurants.
That ratio seems about right to me, since preparing dinner and eating at home has always been the default setting in my home.
But data for January 2015 shows that-for the first time ever-Americans actually spent more money eating in restaurants than they did in grocery stores. It was close; restaurants and bars took in $50.475 billion in January, compared to revenue of $50.466 billion in grocery stores.
There are lots of reasons for this trend, many of them quite fascinating, but I went looking for a stock to recommend to honor this momentous occasion.
And what I found was Cracker Barrel (CBRL), a mid-market restaurant chain that earned its way into Cabot Top Ten Trader this week. Here’s what Mike Cintolo had to say about it:
Why the Strength
With gas prices and unemployment both at six-year lows, Americans have more discretionary income to spend than at any time since the Great Recession. And in true American fashion, many of them are spending it on food. That was certainly the case at Cracker Barrel last quarter, as traffic increased 4.7% and same-store sales jumped 7.9% at the Tennessee-based restaurant chain with a country flair. Seasonal promotions such as the restaurant’s apple cider barbecue chicken and triple berry French toast contributed to Cracker Barrel’s strong fiscal second-quarter performance, which ended January 30. Earnings per share continue to improve too as the company cuts $20 million in costs this year. The combination of cost-cutting and increased customer traffic has prompted Cracker Barrel executives to raise their full-year financial outlook. The company now expects EPS of $6.40 to $6.50 in its current fiscal year, a marked improvement over the $5.64 per share it earned in 2014. As long as gas prices remain low and the U. S. economy doesn’t implode, Cracker Barrel should continue to benefit along with the rest of the retail sector.
Technical Analysis
CBRL has been a long-term winner, but, like all stocks, it goes through corrections. CBRL pulled out of a long swoon in October 2014 and the stock ran to 140 at the end of 2014. After a seven-week consolidation, the stock popped higher on that good earnings report, nipping above 153 a couple of weeks ago. A little time for digestion has CBRL trading at 149, and you should be able to get in at least a point lower is you’re patient. I’d recommend using a stop at 138 for protection.
If Cracker Barrel seems like the type of stock you’re interested in, you can buy it right here and watch it carefully. Or you can subscribe to Cabot Top Ten Trader and chief analyst Mike Cintolo will tell you exactly what to do.
Sincerely,
Paul Goodwin
Chief Analyst, Cabot China & Emerging Markets Report
And Cabot Wealth Advisory
