Texas Roadhouse (TXRH) Share Price Up With Lower Menu Prices
Yesterday we saw a nice move in the markets. Small-caps bounced back after a two-day losing streak and the Russell 2000 rose 8.22 points to 570.62, or 1.5%. The Dow, Nasdaq, and S&P 500 were essentially flat. This is typical of small-cap stock movement; they tend to lead both to the upside, and to the downside.
Yesterday's buying in small-caps is a bullish sign: investors are looking to add higher beta stocks to their portfolio when these stocks are down. The Russell 2000 small-cap index saw 1331 advancing stocks to 621 declining stocks. The buying clearly shows that investors are finding good entry prices for attractively valued small-caps.
Many of the stocks I cover in my service are posting nice gains over the last few days and will be reporting results over the next two weeks. This is a great time to get into these stocks. They sold-off a little in late October and I expect them to benefit from positive earnings reports. In fact, one of my SmallCapInvestor PRO stocks reported last evening, and is showing 10% gains as of this morning. To get access to the portfolio and all the stock reports, click HERE.
Yesterday's buying was broad based, and included stocks from all industries. Today's early trading looks to be a continuation of this trend, with high volume and all indices significantly higher.
Among the leading sectors yesterday was energy, stocks rose as the price of oil gained. We've been following a number of these stocks here in SmallCapInvestor Daily and the past week has shown nice entry prices. American Oil and Gas (AMEX:AEZ) rose over 11%, and Pioneer Drilling (AMEX:PDC) rose 6.6%.
Consumer-discretionary stocks had a great day as well led by Peet's Coffee & Tea (Nasdaq:PEET) up over 10% and Diedrich Coffee (Nasdaq:DDRX) rising over 25%. I wrote about these in yesterday's article.
Shareholders of Landry's Restaurants (NYSE:LNY) had a nice one day gain of 27% on news that Chief Executive Tilman Fertitta has reached a deal to take the restaurant operator private. This is yet another sign that financing is increasingly available for small companies, a bullish sign. The $1.2 billion all-cash deal represents a 37% premium above Monday's closing price. Texas Roadhouse (Nasdaq:TXRH) also saw a nice gain with shares rising 17%. The Kentucky based company beat analyst estimates and raised its 2009 outlook. The company cited lower pre-opening costs, higher revenue, and lower commodity costs. It seems the chain has been able to lower menu prices while improving margins, a notable feat in the face of the recent recession.
Industrials also had a nice day as demonstrated by Drew Industries (NYSE:DW) rising 12% on news that the maker of recreational vehicle (RV) components and pre-manufactured homes easily beat analyst earnings expectations. This could be an indication that consumers are starting to spend again, a welcome sign for an economy that is skeptical at best of consumer confidence.
In early trading today, the top-gainers list is clearly favoring the financial sector. This is a good sign; liquidity is improving in the market. Ambac Financial (NYSE:ABK) is up 37%. It seems the market is expecting better results for this company that guarantees insurance and other credit products. First Keystone Financial (Nasdaq:FKFS) is up 35%. This is another merger story, Keystone Financial is merging with Bryn Mawr Bank (Nasdaq:BMTC). As I mentioned yesterday, it's great to see that companies are finding attractive valuations in this market. This is fueling the merger and acquisition activity.
Other small-cap financial stocks Rand Capital (Nasdaq:RAND) and Cadence Financial (Nasdaq:CADE) are up 25% and 20%, respectively.
All of these financial stocks have been total laggards this year. The best, Rand Capital is flat on the year, while the worst, Cadence Financial is down over 80%. The last three months have brought considerable improvement for this sector. I expect these stocks will continue to bounce around but generally rise as debt and capital markets improve.
Small-caps are still attractively valued, and I see the recent merger and acquisition activity as a sign that many companies feel the same way.
Look forward to tomorrow when I will bring you a recent update from China.
About the Author
Ian Wyatt is a co-founder and President of Business Financial Publishing and the Chief Investment Strategist and Publisher of SmallCapInvestor.com and SmallCapInvestor.com PRO.
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