Market Overview May Be Creating Opportunity For Long-Term Restaurant Investors

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After Business Insider first called attention to diner grievances posted to, the website seemed to gain traction this week.

The news agency publicized a series of food-safety reports involving a Chipotle Mexican Grill, Inc. (NYSE: CMG) site in Virginia, which prompted an 8-percent plunge in stock value.

Since then, traders seized and circulated alerts for a Dunkin Brands Group Inc (NASDAQ: DNKN) store. Dunkin shares dropped about 2.4 percent Wednesday before rebounding to trade up 4 percent off session lows.

The hype is new, but the reports are not. Restaurant patrons have been posting to the site since 2009, with hundreds of stories pouring in each week attributing foodborne illness to a range of public companies, including Starbucks Corporation (NASDAQ: SBUX), McDonald’s Corporation (NYSE: MCD) and Darden Restaurants, Inc. (NYSE: DRI)’s Olive Garden.

None have previously prompted stock movement.

Del Taco Restaurants Inc (NASDAQ: TACO) only rose higher after multiple June 19 posts confirming food poisoning. Same with Chipotle and McDonald’s.

Granted, the most recent Chipotle episode stands out in its involvement of multiple cases at a single location. Most other reports highlight isolated incidents.

Regardless of how Wall Street responds, site founder Patrick Quade sees latent profits in the aggregate stories and urges hedge funds to pay attention. "It seemed a trading opportunity was inevitable," he told Bloomberg.

It is worth noting that site-specific incident rates aren’t perfectly reflected in reports, as consumer-led filings are aggregated on a voluntary basis, and some victims may neglect to participate. Additionally, the real-time information is not necessarily vetted for veracity, so it is possible that consumers misattribute their digestive issues to recent dining excursions.

Related Links:

Whole Foods’ Hepatitis A Outbreak And Other Past Food Scares

Reputation Can Be Much Slower To Recover From Than Fundamentals


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