Tuesday, October 14, 2008


Goldman Sachs downgraded CAKE for the 2nd time this month. Earlier this month, they downgraded the entire upscale casual restraunt group. Today, they lowered their price target to $14. This sent the already beaten down stock down almost 8% to $10.80. It is now trading at 8 year lows.

I think the stock has been unfairly punished.

Oil is down big. It closed at less then $80 a barrel today (it was at $147 in July). Gas is getting cheaper and has dropped $.35 in the past 2 weeks- the fastest drop on record.

CAKE was punished as oil rose up in price. The market thought people could not afford to go out to eat as the price of gas was eating into their disposable income. CAKE has not seen any advance as the price of gas has come down. It has been discounted on the rise of oil/gas but has not been rewarded in the decline of oil/gas.

PE 11.48
Book Value per share $7.875 (Price/ Book Value 1.49)
Price/ Cash Flow 5.30

Currently I own shares at @ $24. OUCH

I think this could be a play over the next 2 months. Good for a $2-$3 pop.

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