Screenshot 2018-12-21 at 1.18.45 PM

I decided that I should write a short note whenever a counter moves by at least 10% within a day or two. The first counter that hit the criteria is Texas Roadhouse. I just started a small position in March this year as I was attracted by its growing revenue and net profit, free cash flow and dividend for the past 8 years.

Unfortunately, in the latest Q1 results, the company announced an 8% drop in net income, even though revenue grew by 10%. The drop in earning is largely attributed to higher labour cost. Scanning through the earning transcript, the labour could continue to impact but might be mitigated by a menu price increase of 1.5%.

While I do not like the drop in profit, I do not see it as a major issue since revenue is still growing. However, the market does not like the results and sent the price down by more than 11% by the end of yesterday’s trading.  I have some loose change in my FSMOne account and decided to add a bit more at US$54.50, bringing my average price to US$58.78 and will monitor how things turn out in the next few quarters.