John Stephenson Shake Shack Inc SHAK-N TOP PICK Sep 23, 2016

*Short* The whole reason a restaurant business in the US can do well, is that there is a huge market, and hopefully it can go global. However, how many $20 hamburgers do people need? It is a premium burger. The stock is trading at a ridiculously high multiple, over 70X. That multiple just can’t be supported on modest growth. The disparity between eating out and eating at home has gotten to the point where it is hard to see justification of eating a high end hamburger at a quick service restaurant.

The stock looks great now, and has had a great run recently, though $30 off its all-time high. No reason to sell it.

Time to add? They are only in 26 states so far, so there is a long playing field for SHAK-N. It trades at a high multiple, so if they disappoint it can become very painful quickly. Be cautious. He prefers to own the established names like SBUX-Q or CMG-N.

Maybe the US consumer is slowing, but remember that they continue to expand across the world take share in those places. They've done everything that a growing company should do, including hiring a CEO (from Papa John's) who can expand and has expanded a company.

Is -7% the last month, a weak year so far. At a 34 RSI and is very oversold. They guided revenue at +16-17% this year. If it reports that next Thursday when they report, this is a good set up.

Quality food and good managers. Buy 50-75 shares initially.

Consumer discretionary hasn't held up, because consumer sentiment has fallen, taking SHAK down. But SHAK's fundamentals remain the same. RSI is at 30, so is oversold. That said, it's trendless and this is not a buying opportunity. It could be rangebound for a while. He's long-term and will hold. Traders love it here, though.