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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: pcyhuang who wrote (3984)	5/3/1998 3:12:00 AM
From: James Clarke	Respond to of 78521

I have looked at Boston Chicken several times and rejected it each time, which were good decisions in hindsight. Before you start comping its multiples to other restaurants and to the S&P, you'd better make sure you understand the accounting, which is very different from other restaurant stocks. What is on the books as assets are some sort of obligation of franchises. If the restaurants don't make money, those assets could be worth zero. That is VERY different from a company that owns real estate. If the business conducted in those properties fails, at least the real estate is still worth its book value. Be very careful on this one. A lot of value investors have gotten clobbered already. Go to a Boston Chicken and enjoy the good food, but then look out the window and tell me how many other fast food restaurants you see. In my experience, its usually at least a couple. This was a hot concept and Boston Chicken executed well, but they are in an industry with virtually no barriers to entry. The real shame should be on institutions who bought this stock at the peak. I cannot imagine what they were thinking.