We recently compiled a list of the Jim Cramer Discussed These 11 Restaurants and Retail Stocks. In this article, we are going to take a look at where Texas Roadhouse, Inc. (NASDAQ:TXRH) stands against the other restaurant and retail stocks Jim Cramer recently talked about.
Jim Cramer, the host of Mad Money, recently took a closer look at the state of the consumer, focusing on restaurants and retailers to understand the broader economic picture. According to Cramer, there is a common misconception about the economy, where people tend to think of the consumer as one homogenous group. He pointed out that there isn’t a single consumer whose behavior can explain the overall economic trends. Instead, Cramer identified two distinct types of consumers in today’s market.
“One consumer’s going out looking for absolute bargains. The other consumer’s looking for what I call “premium value” or “value at a price”. More expensive, but relative to similar offerings, you get a great deal.”
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This conclusion came after Cramer listened to a variety of retail and restaurant earnings calls. He expressed skepticism about relying on broad aggregate data, such as national retail sales, which he believes doesn’t capture the full picture. Instead, Cramer prefers analyzing individual companies, piecing together information from different sources to form a clearer sense of the consumer landscape. He believes this approach provides a more accurate snapshot than relying on overarching statistics.
Cramer also noted that the rise of these two different consumer types has perplexed Wall Street. In the past, there was typically one consumer who either spent or didn’t, but that has changed. Now, there are two groups of consumers, each spending in different places.
In his conclusion, Cramer urged investors to stop focusing on whether consumers are struggling financially or facing challenges. The key, he said, is understanding choice.
“The bottom line: Stop trying to figure out if the consumer’s cash strapped. Forget the headwinds. What matters is choice. Right now, consumers are lapping up absolute value at the lowest price or premium value, meaning better stuff that’s a good deal versus the competition. But everything else? Maybe not so much. Hence why the aggregate numbers just don’t tell the story.”
Our Methodology
For this article, we compiled a list of 11 stocks that were discussed by Jim Cramer during the recent episode of Mad Money on December 19. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
View of kitchen staff working together to deliver an extraordinary dining experience.
Texas Roadhouse, Inc. (NASDAQ:TXRH)
Number of Hedge Fund Holders: 45
Cramer praised Texas Roadhouse, Inc.’s (NASDAQ:TXRH) low prices and overwhelmingly good food.
“At the same time, there’s the other consumer who only seeks absolute bargains. The under $11 meal at Chili’s owned by Brinker and at Texas Roadhouse, the same deal. Incredibly attractive… Texas Roadhouse overwhelms you with fabulous food at a price that seems like they forgot to put one of us on the bill.”
Texas Roadhouse (NASDAQ:TXRH) is a well-known casual dining restaurant chain with locations across the U.S. and internationally. In the third quarter, the company raised menu prices by less than 1% for the fourth quarter, confident that the increase would maintain traffic and support its value proposition. It also anticipates a steady to positive outlook for commodity and labor inflation.
The company confirmed that its 3.1% pricing run-rate in the menu would remain through the first quarter of 2025. Michael Bailen, Head of Investor Relations, stated, “… and then we would have 2.2% rolling-off and we will go through our normal conversations to see what we may or may not do come the beginning of the second quarter.”
For 2025, Texas Roadhouse (NASDAQ:TXRH) management plans to open around 30 company-owned restaurants across all brands. Additionally, a tentative agreement is in place to acquire 13 Texas Roadhouse locations from a major domestic franchisee. International Texas Roadhouse franchisees expect seven openings, while domestic Jaggers franchisees are targeting three new locations.
Overall TXRH ranks 6th on our list of the restaurant and retail stocks Jim Cramer recently talked about. While we acknowledge the potential of TXRH as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TXRH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.