My Foolish colleague David Kuo often shares his observations that Singaporeans have two favourite past-times: Eating and Shopping. I’m not too sure about the rest of you, but I do love my food. And for someone like me who loves investing, I count my blessings when I get to have the best of both worlds when food gets married with investing. When we’re looking at price-charts of the stock market with its daily wiggles, it can be easy to forget that stocks are essentially a piece of ownership in a living, breathing business. When you go shopping at…
My Foolish colleague David Kuo often shares his observations that Singaporeans have two favourite past-times: Eating and Shopping. I’m not too sure about the rest of you, but I do love my food. And for someone like me who loves investing, I count my blessings when I get to have the best of both worlds when food gets married with investing.
When we’re looking at price-charts of the stock market with its daily wiggles, it can be easy to forget that stocks are essentially a piece of ownership in a living, breathing business.
When you go shopping at the mall for your favourite Coach handbag (for the lovely ladies) or sip your favourite iced mocha at Starbucks, you’re actually looking at two American stock market darlings that have returned 360% and 440% respectively over the past decade. Did that fact slip past your notice easily?
In the same vein, when we’re enjoying our meals at various food establishments, we might sometimes forget that we’re actually seeing locally-listed stocks in action!
Buy What You Know
One of America’s greatest investing-figureheads is Fidelity Magellan Fund’s ex-manager, Peter Lynch, who ran the mutual fund from 1977 to 1990 and produced astounding 29% annualised returns. Every $1,000 entrusted to him at the start of his tenure would have become $27,000 when he retired from his post. In contrast, the American stock market, represented by the S&P 500 index, only grew that same $1,000 into almost $5,000.
Despite besting the US stock market by an enviably huge margin in his professional career, Lynch did not rely on squiggly chart-reading nor timing the market. In fact, one of his favourite investing adages was to ‘Buy What You Know’.
In essence, it entails investigating companies that provide goods and services that you are familiar with for their investing merits – something that all individual investors like me and you can do.
Let’s Tuck In!
Bringing us back to food, I’m sure some of you have your own favourite food joints and you might be pleasantly surprised to find out that some of your favourites might actually be run by publicly listed companies. Let’s take a look at some of such companies where you can actually taste its offerings as part of your investment research (yes, that does sound wonderful, doesn’t it?).
Breadtalk’s (SGX: 5DA) eponymous BreadTalk stores, selling the famous Pork-Floss Bun among other unique breads, first captured the public’s attention when it first opened in Bugis Junction in 2000. In the 13 years since, the company has expanded its offerings to include; air-conditioned food courts like Food Rebublic; eggs-and-toast outlets like Toast Box; and Chinese-cuisine restaurants like Din Tai Feng, among others in more than 15 countries around the world.
Along the way, Breadtalk’s top-line has increased by more than 10 times from 2003’s S$40.3m to last year’s S$447.3m. Meanwhile, those sales have certainly not counted for naught as profits have expanded by 11-fold from S$976,000 to S$12m.
Lovers of Japanese ramen might have noticed a new player that appeared on the Singapore ramen-scene last year called Menya Musashi, an award winning and highly popular ramen brand in Japan. The brand was brought in by Japan Foods Holding (SGX: 5OI), which counts Ajisen Ramen as its mainstay in Singapore. The company’s shares have been on a roll since its Feb 2009 IPO at a split-adjusted price of S$0.167, where it has gained 230% to its current price of around S$0.55.
That kind of market-outperformance (the Straits Times Index (SGX: ^STI) only increased by 96% in the same time) would be no surprise if we looked at how its business has performed. The company currently carries $18m in cash on its balance sheet with no debt, and has seen its revenues almost double from S$33.6m on March 2009 to S$61.3m on March 2013. At the same time, earnings have expanded by 130% to S$6.4m.
Chinese-soup aficionados might want to check out the Soup Restaurant’s (SGX: 5KI) business while lapping up soups in its namesake restaurant – Soup Restaurant, or 三盅兩件 (pronounced ‘San Zhong Liang Jian’ for those who can’t read Chinese characters).
The company runs a total of 19 Soup Restaurant outlets in Singapore, Malaysia and Indonesia. Last year, it sold off its stake in Y.E.S F&B Group, which operates the Dian Xiao Er chain of restaurants in Singapore and Indonesia. Soup Restaurant will now focus on its namesake restaurants and the opening of a new multi-brand concept in IMM Building in Jurong, Singapore later this year.
Revenue for the company’s existing business came up to S$35.3m, a 6.1% increase over last year’s sales while profits ballooned by 130% to S$3.7m, largely due to the gains from the sale of its stake in Y.E.S.
While you’re happily tucking away all your food, be aware that Peter Lynch’s advice was not to invest in any company just because you like its products or services. It’s very important to study the financials as well as the company’s future prospects before making any investing decision.
But that said, there’s no harm in digging into both a restaurant’s food as well as its financials right? Besides filling your stomach, you might just chance upon a good opportunity to fill your wallet too.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing owns shares in Coach, Starbucks and Japan Foods Holding.