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Strategies & Market Trends : Value Investing

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To: scbeachbum who wrote (76415)	10/23/2024 11:50:50 AM
From: Harshu Vyas	Read Replies (1) of 78702

Not a fan of these restaurant chains. Cash flows are generally ok and most can probably run on negative working capital since they receive payment at the POS and can use their inventory before they pay suppliers etc. What worries me about almost all of them (i.e restaurant chains that have underperformed in recent years) is the debt that has been used to fund historical expansion - how the heck will they ever repay it? Most don't have the earning power that the likes of MCD do even if they can spit out some cash every quarter. And you have to factor in higher rates, too. Interest expense will be a killer for so many zombie companies that could operate in a period of cheap money. I'm sure many leveraged companies will fall over the next decade. At the minute, Wall St continues to throw cash and play the "nice guy" role. Let's see how long it lasts. Watch high yield bond spreads which are currently around 2007 levels @ 2.92%. Far too low and don't think it can stay that low. Yes, rates are coming down, but I think the market's just being too complacent. I watch the RRGB turnaround closely - get the feeling the CEO knows what he's doing. Even then, it's still too speculative for me.

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