Consumer Confidence – Where Consumer
Confidence Numbers Are Telling Us To Invest
The Dynamic Wealth Report
February 28, 2011
A few weeks ago I spent a good deal talking about consumer confidence
numbers. If you recall, there are three different consumer confidence
studies out there…
All three were different…
Yet amazingly, they all have one thing in common… confidence numbers
are improving.
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Regardless of which study you look at, over the last 12 months,
consumer confidence numbers are moving higher. Up and to the right if
you will.
As a result, the freewheeling spending by consumers, while not back with
a bang, is picking up speed. Right now, consumers are more willing to
spend disposable income on higher end products, travel, vacations, and
even food.
The willingness to open up the wallet is improving… and that’s important
for our economy. It’s also great news for stocks…
As a matter of fact, I’ve already discussed a number of different ways
to profit from this trend. I’ve suggested you look at areas where
consumers have cut back. Identify industries where consumers put away
their wallets during the recession.
Those are the same industries where spending is now picking up speed.
The first area to come to mind is vacation service providers… think of
airlines, casinos, and hotels.
I also highlighted the recent surge in car and truck purchases. The
automotive companies are seeing product sales pick up steam too.
If you put your mind to it, I’m sure you can uncover a few more…
As you put on your thinking cap, let me share one of the most obvious
areas… Fast Casual Restaurants.
Now bear with me for a moment… I’m not talking high end steakhouses or
fancy French restaurants sporting 5 star ratings. Nope. I’m talking
about the everyday swing by for a sit down meal that many Americans
enjoy.
Take a look at the weeknight spot to grab a beer, a meal, or enjoy the
moment.
This is one of the first areas many Americans cut back on when times
were tight. Dinners out were put on the back burner. People started
cooking at home… Making dinner at home became the new American pastime.
Now the trend is starting to reverse.
With consumer confidence rising, many are clearly feeling confident
about their jobs once again. Spending money is no longer shunned. And
while it’s not like the old days, the money flow is starting once again.
So who’s going to benefit from this trend?
Numerous companies will see their performance improve, but one
restaurant I like is Chili’s! They are owned by a company called
Brinker
International (EAT). Don’t you just love their ticker symbol!?!
Chili’s has over 1,300 locations across the country. I’m willing to bet
you’ve eaten at one… or have at least heard about them.
Now, what’s interesting about Brinker is how they reacted to the
economic downturn. They realized customer visits and revenue would fall. So they started working proactively on cutting back expenses.
But they did things a little differently.
Instead of switching to cheaper products or lower quality food, they set
out to streamline operations.
They did studies in kitchen efficiency. They looked at how long it takes
to prepare certain meals. Who actually needs to do what… and how much
time it takes. They installed new kitchen appliances to eliminate some
of the hands on cooking. As a result, they were able to cut back on the
number of cooks needed in the kitchen.
The remaining cooks can now focus on other food prep activities.
Brinker was also able to streamline service. They re-created how food
and drinks are delivered to customers. And, as a result, they eliminated
table bussers.
By stripping back just one layer of people and consolidating their job
activities, Brinker eliminated a time delay waiters had experienced. As
a result, a bottleneck was eliminated, allowing food and drink to reach
your table much faster!
Despite all the streamlining, things are still tight at Brinker.
Last quarter customer traffic was down 7.1%. It’s not what you want to
see, but they made the best of that traffic. Same store sales fell only
4.9%. So, despite fewer customers, they were able to keep revenue from
falling too far.
Now here’s the upside.
Remember, customers are once again starting to eat out. Chains like
Chili’s will soon begin seeing an increase in customer traffic and
spending. Customer numbers will only grow as the economy improves. And
once that happens, you’re going to see revenues jump as well.
Best of all, the cost cutting Brinker did during the downturn will
stick, so costs will remain low and profits will skyrocket.
These are the types of investment you want to jump into before consumer
spending spikes… once financial numbers start improving significantly,
the stock is sure to take off. If you’re looking for a great way to play
the improving consumer confidence numbers, take a close look at the fast
casual restaurants. You’re sure to grab some big gains there!
• Precious Metals Industry (Up 18.9%)
The precious metals industry is on a run because of the easy money
policy of the Fed and the threat of inflation. This trend probably
won’t end any time soon. Leading this group higher is companies like
Silver Wheaton (SLW). Their stock is up 30% in the
last month.
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