the Financial Times

That’s where I read a recent article on the state of the US fast food industry. I’m relying on the information in it, which I would be extremely hesitant to do with a US-based periodical, for two reasons: I don’t own any fast food stocks, other than indirectly through index funds and don’t have any current intention to buy; and the only reliable and informed news publications I’m aware of are the FT, the Economist magazine and the owner of both, the Nihon Keizai Shinbun.

Anyway, the article argues that the fast food industry in the US is in trouble. In a typical recession, customers who eat at fast food places during good times brown bag it to work and prepare their other meals themselves at home. However, people who eat at more expensive restaurants when the economy is booming typically trade down to fast food in the kind of weak economy we’re experiencing in the US today.

The FT’s recent survey of US fast food companies says that’s not happening now. It appears that the culinary habits of the more well-off haven’t changed, despite higher food prices.

At some point, fast food may become beaten down enough that more than all the bad things that could ever happen have already been factored into stock prices. Or it may be that deep value investors, who make their living doing this kind of investing, will sense that we’ve passed the bottom and that a rebound is under way (some may be doing this now, although I personally have no current desire to participate), on the idea that the brand names alone are worth, say, 2x , or 3x, the stock price.

Looking at this a different way, watching fast food stocks may be a way of getting an early alert that the strategy of holding companies with foreign revenues and $US costs is becoming long in the tooth.