One of the first movers seeing an uptick in spending due to increased consumer confidence is the restaurant space. Only a few diehards really like to stay home and cook. Dining out is a great way to escape. Even better is going to a restaurant for a meal that's affordable.
The fact that dining has suffered during this recession is indicative of how bad things really have been.
Given that confidence is rising, it's no surprise then that Landry's Restaurants (NYSE: LNY) has almost tripled in value since hitting bottom in early March.
While it's true that the stock sell-off went too far, it's also true that this rally has gone a bit too far.
LNY trades for a high multiple of earnings, and one can debate if confidence truly translates to more spending. The more likely path in the short term is down.
I like the story in the long term, but I would prefer buying LNY at a cheaper price.
Instead, now is the time to concentrate on restaurant stocks that cater to the new frugality. Stocks like McDonald's (NYSE: MCD), Panera Bread (NASDAQ: PNRA), and Chipotle Mexican Grill (NYSE: CMG) all occupy a unique niche in this "frugal nation," as do these seven other frugal stocks.
Up next: Consumer stock #4.
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