advertisement
Apparently, the consumer isn't quite dead yet, as evidenced by this week's surprisingly strong retail sales report. One month's data do not a trend make, and there's still plenty of excuses for consumers to rein in spending, but it looks like all doom-and-gloomers might be exaggerating the downside risk.
It has been my experience over the past 20 years that betting against the American appetite for consumption is a bad idea. Will this time finally be different? It's possible, but unlikely, especially now that interest rates are coming down hard and the government has just authorized a generous handout.
So it's time to buy some of the beaten-down consumer oriented stocks. One such example is Buffalo Wild Wings (BWLD, news, msgs). The company recently announced stronger-than-expected fourth-quarter earnings and reiterated robust growth for 2008. In other words, while consumers might not be lining up to buy bigger and bigger houses or cars these days, they can apparently afford to fork over a few bucks for some chicken wings and a beer.
Restaurant stocks have been beaten down pretty good over the past six months amid concern that consumers will reduce their spending at casual eateries. P.F. Changs China Bistro (PFCB, news, msgs), The Cheesecake Factory (CAKE, news, msgs) and California Pizza Kitchen (CPKI, news, msgs) are among the competitors that have suffered significant setbacks.
However, unlike most of these companies, Buffalo Wild Wings continues to post solid double-digit top-line growth with mid-single-digit same-store sales. Earnings growth has also been relatively consistent. Despite such impressive results, the stock trades at a discount to its peers and to the market.
What makes the valuation even more attractive is the company's strong balance sheet. Back out the cash on hand and this stock is a better bargain than the company's food. I'll dig in by buying 700 shares at today's opening price, with a minimum target of $30 a share and a secondary objective of $36-$37.
Rate this Article
High
