A Stock Tip From A Fortune Cookie
The Dynamic Wealth Report
October 12, 2009
I have a passion for Chinese food. Ok, ok, it’s more of an addiction. I’ve always loved Chinese food. It’s always fun to eat using chop
sticks. And I love trying new types of food. I was in heaven dining in
Singapore. There, numerous cuisines all converge… its Chinese one day,
Thai the next, then Indonesian.
The sad part about my addiction is my lack of skill. I love to cook, but
somehow the gene for cooking Asian delicacies passed me by.
When I crave a good meal, I’m always going out.
And that’s great because I can try a bunch of new restaurants.
I’ve got favorite places all over San Francisco. Now that I’m back in
Phoenix, I’m refreshing my favorites list here. The problem with Phoenix
is we don’t have a real Chinatown area. It’s a struggle to find good
hole in the wall Asian food.
As a result, I’ve been relegated to getting my fix from chain
restaurants.
And that’s where I got a great stock tip.
A few weeks back, I was working in the yard… it’s a chore that never
ends. We were trimming trees and removing brush. The hunger pains hit
and I knew what I wanted… Chinese food.
There’s a Pei Wei Asian Diner not too far from us so we decided to stop
in.
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For those of you who don’t know, Pei Wei is the fast, casual restaurant
concept launched by P.F. Chang’s. Now, P.F. Chang's China Bistro (PFCB)
isn’t a hole in the wall type place. As a matter of fact, it’s the exact
opposite of a hole in the wall Chinese restaurant.
P.F. Chang’s uses good quality ingredients and has developed a very
comfortable atmosphere for dining. Whenever I eat at a PF Chang’s (in
San Francisco, Phoenix, or Boston), I’m always amazed at how popular the
place is.
A few years ago, PF Chang’s launched a new type of restaurant. A casual
service concept serving the same great food. That was the birth of Pei
Wei. You won’t find any waiters at Pei Wei. You order at the counter and
get your own drinks. The food is great, and very affordable.
The only thing I like better than Chinese food is a good deal on Chinese
food!
Back to our meal at Pei Wei.
We arrived in time for a late lunch. I was surprised at the number of
people in the restaurant, and the flow of new customers never seemed to
die down. I asked the nice lady delivering our food if they were always
this busy, and her answer surprised me.
She’d been working at Pei Wei for more than three years now. She said
business was picking up, and more people were eating there on the
weekends.
What a great indicator of business strength.
Over the next few weeks, I visited two other Pei Wei stores (I told you I
love Chinese food). I asked all the servers the same question… and
their answers were all the same. They were busy and getting busier.
In just a few weeks (October 21st to be precise), PF Chang’s is going to
announce Q3 earnings. You can hear the webcast live right on their
website.
I think their earnings numbers are going to be strong.
Here’s why… the analysts covering the stock have lowered estimates to
ridiculous levels. According to the information I was able to dig up,
the average analyst expects PF Chang’s to generate an EPS of $0.31. Not
bad, yet last quarter they generated $0.51 in earnings, and the quarter
before that they generated $0.56.
So in the heart of the recession, the company was beating estimates…
And this quarter I’m expecting them to do the same.
I think now’s the time to buy the stock. PF Chang’s (who owns the Pei
Wei restaurants) trades on the NASDAQ market under the ticker PFCB.
They’re near their 52-week high and are up substantially from the $14
lows they set just a few months back.
I love the food at their restaurants, as do many other diners. Their Pei
Wei's fast, casual experience is a hit. And, the traffic in their
restaurants (according to my little bit of research) is improving. The
third quarter is looking to be an interesting one.
Earnings estimates are surprisingly low, and I think an upside surprise
is likely. Traders might accumulate some shares going into the earnings
announcement. Longer term investors won’t be disappointed either. I
think this restaurant concept has a long life ahead of it.
• Coal Industry (Up 13%)
In just the last month, we’ve seen the coal industry rebound. Leading
the group higher is Patriot Coal (PCX) and International Coal (ICO). Both stocks are up more than 34% in just the last month.
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