Do you think Shake Shack is cheap?

Are you into fast food? I count myself to the social fast food junkies – I have it sometimes when going out, but it’s not a regular thing.

But if I eat it, then I want it to be of good quality. From the many available choices, Shake Shack (SHAK) stood out of the crowd for me.

I love their classic burger and their strawberry shake. Their larger burgers… well… they taste great but the sauces dripped all over me. But I keep coming back for the classic!

They are expensive compared to their large competitors. But I am happy to pay for the quality of food I get. And where there is one happy customer… there should be more!

When you love the product, look into their stock price…

​That’s exactly what I did. Here it is:

I did not even bother to annotate the trends into that chart. Clearly, that stock price took a beating and came down from its former highs of around $90 to now somewhere between $30 – $40.

It’s screaming “downtrend” all over it. But it’s leveling off and appears to be stable in its current price range. Has it reached its bottom price yet?

What about finances?

​Revenue growth is fantastic. Obviously, these guys are expanding rapidly. Their margins are not that great, but… you could say the same about Amazon and many others. 

So what’s going on here?

Is it a buying opportunity?

It’s not… yet!

​The stock price is cheap, the products are great, the business is expanding. My own experience with them has always been good (friendly, professional and motivated staff etc.), they are not in any financial trouble… so what’s the problem?

Someone keeps selling their stocks, keeping the price below $40. It does not matter how great the company is at this point – as long as demand is lower (or equal) to supply, there will be no uptrend. 

Based on the chart, an uptrend is likely to happen – but when? I would not want to park my cash for possibly years to come.

Wait for the uptrend indicators

​Instead, I am putting this company on my watch list. That’s just a spreadsheet of companies where I check regularly if a trend materializes. 

For SHAK, I will keep an eye on:

  • ​Trend cross-overs
  • Price breakout: if the stock price goes above $43, the uptrend might start

Create your own watch list

If you find a company that you like (because you made great experiences with their products, or someone recommended it), check their finances and their stock price history.

If it’s not a buy, keep it on your watch list. If investors recognize the company’s value and potential, they will start buying its stocks. This will create a new uptrend – that you can participate in. Don’t buy just because it’s a good company and the stock appears to be cheap.

Even if you are correct, it might take years to happen – and meanwhile, it’s better to invest your money elsewhere.

Happy Trading!



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