What do a cake maker and a burger joint have in common with a seafood restaurant? Each has been killed this month by rising prices on everything from labor and food to gasoline prices. On Wednesday, Red Lobster’s parent company, Darden (DRI) fell after missing estimates. Cheesecake Factory (CAKE) and Sonic (SONC) followed suit. Is this an opportunity to feast on the shares?
Many of these companies have operational issues, Jeff Macke says. But there is an argument that no one industry is more affected by high gas prices than casual dining.
It’s discretionary spending and you have to drive to do it.
Interest rates on adjustable rate mortgages are another possible reason behind the slump, Eric Bolling says. Between interest rates and gas prices going up, people just aren’t going out as much.
Pete Najarian recommends Landry’s Restaurants (LNY) because it’s diversified, and isn’t entirely exposed to casual dining.
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Trader disclosure: On June 12 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders:
Macke Owns (ATVI), Najarian Owns (NITE), (GS), (STX), (AAPL); Bolling Owns (ICE), (T), (DIS)(NMX); Bolling Is Short S&P Futures; Bolling Is Short Nasdaq Futures