Five-star restaurants aren't really my cup of tea -- unless they're great ideas from The Motley Fool's community intelligence tool, CAPS.
Better than Zagat
In CAPS, stocks are rated from one star to five stars. So what are the five-star restaurants, the ones with the highest ratings in CAPS? I can tell you this: We probably won't see all of them at the top of the Zagat Restaurant Survey. But we're talking investment opportunities here. Isn't that more important?
|
Bulls |
Bears |
1-Year Return | |
|---|---|---|---|
|
Carrols Restaurant Group (NASDAQ:TAST) |
34 |
0 |
2.2%* |
|
Texas Roadhouse (NASDAQ:TXRH) |
169 |
3 |
0% |
|
Morton's (NYSE:MRT) |
28 |
1 |
(3.2%) |
|
Kona Grill (NASDAQ:KONA) |
72 |
0 |
60.8% |
|
Chipotle (NYSE:CMG-B) |
318 |
5 |
11.5%* |
*Returns since December 2006 IPO.
**Returns since October 2006 IPO.
As you can see from the wide range of concepts and returns, we have a pretty motley group here. And that's good, because everyone's taste in stocks is different, and CAPS captures that diversity very well.
The franchise operator
Carrols Restaurant Group is a franchise operator of Burger King (NYSE:BKC), Pollo Tropical, and Taco Cabana restaurants. The only thing tougher than owning and operating a restaurant is franchising a number of them. The franchiser takes its cut right off the top, so you better be a good operator.
Quite frankly, Carrols is doing pretty well, something that Rick Munarriz noticed in March and that is not lost on the CAPS community. Corporate-wide, I see returns on invested capital have been rising steadily. Jpenabad helps us understand why: "Basically, you get all of the BKC cash flow and get to invest it at 15-25%, generating tremendous growth."
Foolish capital allocation of shareholders' money? Call me very interested -- just don't call me late for dinner.
I'll have mine medium rare
I have to wipe off my keyboard -- my mouth is watering just thinking about the succulent delights from Texas Roadhouse and Morton's. And that's just the steaks!
Reading the CAPS pitches, this sounds like a classic "buy what you know" Peter Lynch-style stock from the authors' perspective. But not only do CAPS participants like the food, they speak favorably about the growth prospects. That's as good a combination as steak and potatoes.
The little guy
The only reason I know about Kona Grill is that I edited Rick Munarriz's articles about the company. It's a small one -- its market cap is just north of $100 million, and it had only 15 restaurants as of March 9 -- but it hopes to catch a long wave and ride it all the way to success.
As you can see, it's been the best-performing stock of the group by far. Has the market already discounted lots of future profitability forward and bid shares up too high?
South of the border special
If there's one thing I miss since leaving Alexandria, Va. (besides all my colleagues), it's the carnitas burrito that I used to get way too often at the Chipotle down the street. My family loves Moe's Southwest Grill, but Chipotle is the best deal for my money.
Maybe that's why so many CAPS Fools love the Hidden Gems recommendation. The growth, the increasing margins, the cash flow generation, the excellent returns on capital, and the commitment to quality don't hurt, either.
The Foolish bottom line
Unlike restaurants that tend to cater to a narrow set of tastes they hope lots of people might like, CAPS has a sampling of anything any investor might want to see. As you'll see below, I like to look for the best retailers and restaurants and hopefully find them at bargain prices. And these happen to be the top ones in CAPS that I want you to know about, too.
For more on these five-star restaurants, check out:
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Chipotle's B-shares have been recommended by the Hidden Gems newsletter. Rule Breakers selected Chipotle's A-shares. Both newsletters are available for a free 30-day trial.
Retail editor and Inside Value team member David Meier has been to a five-star restaurant in Florence, Italy, and it was incredible. He is ranked 1,187 out of 28,012 in CAPS. He does not own shares of any of the companies mentioned. You can view his TMF profile here. The Fool takes its disclosure policy very seriously.
