Cheap Thoughts

For the most part, I have stopped listening to "experts " dissect, predict and analyze the day to day movements of the public markets.  There is not much value in listening to someone try to predict the unpredictable.  I have begun looking at the economy as an elevator, either ascending or descending, improving or declining, while the day to day movements of the markets are like a yo-yo you're playing with while the elevator is moving.  I don't really care whether the yo-yo is going up or down on a given day, it is immaterial to the direction of the elevator.  As long as the elevator is moving up at a comfortable pace and the cables are not at risk of snapping we should rest assured that all is well (for now).

JP Morgan was once asked by a fellow executive what he thought markets would do in the coming months, his response, "It will fluctuate."  Warren Buffett has echoed a similar sentiment throughout his career and I think the world would be wiser if we took their advice to heart.

I was doing some poking around looking into different companies that interested me when I came across something quite surprising.  I noticed that Chipotle has a higher P/E ratio (56), than Google (32), Apple (15), HP (11), and IBM (12).  That means people value Chipotle’s profits more than each of those technology companies.  I did a little more digging and discovered that McDonalds has a higher market cap than Twitter and eBay combined, Panera is valued 4x as much as Zendesk, and Yum Brands (Taco Bell, KFC Pizza Hut) has as P/E ratio that is 2x higher than Oracle.  

I would venture to guess that most food/consumer goods companies are listed at the less risky end of the investment spectrum when compared to technology companies.  Does that really mean that food offers a greater upside and less downside risk than those high growth businesses  everyone loves to talk about?  I guess “changing the world” isn’t as important as eating out.  Now obviously there are thousands of different ways to dissect each of these companies, but I do find it interesting that investors believe food has more potential than technology. After all, it seem's much more difficult to create a new Google than a new Panera.