Mr. Buckley: Yes, I think so. The restaurant group, overall, has performed quite well. Applebee's (APPB) has been a very strong performer, up 45% in calendar 2001. Darden (DRI) has performed quite well rising 30% year to date, and Wendy's (WEN) is up about 5% so far this year. Overall, the restaurant group has performed well, and I think the performance is a function of a couple of things. I think it's a function of relative earnings growth, and I think it's the status of the industry as a safe haven, a defensive investment vehicle.
TWST: Janice, what in your view should be noted about the performance of
the restaurant stocks over the past seven months? At our last meeting,
your top recommendations included P.F. Chang's, TRICON Global for value
investors and Brinker as a GARP story. How well have these stocks
rewarded investors?
Ms. Meyer: What I think is most notable about the group is the
performance in the face of slower economic growth. This group did not
slow down as much as some other consumer groups did. To Joe's point
about being a safe haven, while restaurant sales certainly do suffer in
a slowing economy, they don't slow as much as some other groups. You can
decide not to buy that third white tee shirt at the Gap, but you can't
choose not to feed your family a meal. That has made this group a little
more resilient on the top line than people expected, and has helped
drive some of the performance. In terms of the picks, P.F. Chang's
(PFCB) and TRICON (YUM) have done very well year to date, rising 31% and
39% respectively. Brinker (EAT) is down a little this year, 11%, as it
has just recently given back some of its stellar gains from last year.
Last year Brinker shares rose 75%. We think Brinker will rebound quickly
as investors become more confident that their business will remain on
track.
Tickers included in this excerpt: APPB, BUCA, DRI, EAT, JBX, MCD, MRG, OSI, PFCB, PNRA, RARE, RI, RYAN, SBUX, WEN, YUM
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