I can't really take credit for the "heart-attack-in-a-bag" metaphor, because it's merely a variation on the "heart-attack-on-a-plate" description the "Food Police" gave to Fetuccini Alfredo (can't remember who they really are, but they're the organization that each year comes out with all those negative, headline grabbing reports on fat and calorie contents of popular foods: movie popcorn, Mexican food, Chinese food, etc.) I made the mistake of referring to a dish as such when I was shooting a commercial for an Italian restaurant. I said it as a joke, but the chef really took it personally. I guess the albeit far-fetched implication is that chefs are murderers who serve this artery clogging delight. Well, he told me it remains his most popular pasta dish, in spite of this label and the brief media attention just a couple of years ago.
I feel the same way about "cancer-in-a-box" (hey, I'll coin that one if no one else has come up with it). I'm not a smoker, and I despise smokers that try to share their habit with me without my permission, be it second-hand smoke or even the smell. But people will make their food and other lifestyle choices most often on personal desire and not on commmon sense or what's good for them.
As far as FM's current down cyle goes, I don't think we've seen broad-based institutional selling, because on many days, FM has been down on below average volume. Threfore, I think it's been a simple matter of demand. That is, there aren't a lot of buyers out there. Many investors probably decided to take their profits (or losses for the end of year tax write-off). The most concern probably centers around FM's debt, and how much of the ongoing profits they will devote to paying that off. This may continue to impact earnings enough to keep the PE from rising to lofty levels.
FWIW, I think this stock is currently undervalued, but only slightly. FM needs another knockout quarter to get its share price climbing again. With their current expansion plans, excellent execution on marketing strategies, plus the bonus of a potential $$ settlement on the Vons suit and the possibility that the $0.99 price wars will be ending soon, I think there is much greater potential for FM than the market is currently giving it. See the earlier posts for an analysis of what a $.10 or $.20 cent increase in the Jumbo Jack could mean to shareholders.
Also, this downward cycle has happened to FM before. Look at both Oct-Dec '96 and '95, and you'll see similar declines, followed by eventual run ups. Oct. '96 went from a high of $10 7/8 down to $8, and didn't start its move back up until December 30th. So far, we seem to be in the same pattern. I believe FM has good prospects to be back in the low $20's in a few months, and has longer term potential to double within a couple of years. They're doing everything right, IMO, and represent a more conserative stock to be in, especially if you want to balance volatile high-tech holdings with less risk. I don't see any more downside here unless we have a severe bear market or crash. But then everything else will suffer, anyway.
As always, do your own research
(or just go get an oreo cookie shake if you want to feel better--let's hope the Food Police doesn't analyze one of those!)
D. Kuspa |
