We’ve had discussions here about different ways to use the huge amount of data freely available on the web to make better informed investing decisions. Let’s take a look at some graphs courtesy of Google Trends and see if they can inform us about which restaurant stock to purchase.
Our Subjects
For this experiment, we’re going to look at Texas Roadhouse (TXRH), Panera Bread Company (PNRA), and California Pizza Kitchen (CPKI). Why these three? My fiancée and I ate at Outback Steakhouse this weekend, but I wish there was a Texas Roadhouse nearby we could have gone to instead. I took a brief look at the stock in the fall, and thought I should look into it again. As for Panera, this stock is a darling of the Phil Town crowd and has been in the news and generally talked about a lot lately. California Pizza Kitchen came as a competitor in Google Finance; I’ve also eaten there before.
Let me get right to the charts. Here’s one showing the relative number of searches for each company’s name at Google:
Now I admit that this data isn’t foolproof. “California Pizza” isn’t necessarily a search for California Pizza Kitchen, just as “Panera Bread” isn’t necessarily a search for the Panera Bread Company (a graph for just “Panera” shows much higher numbers). Maybe some of those “Texas Roadhouse” searches were for real estate. I don’t know.
Assuming that the percentage of error in the graph above evens out for all companies, we could read a little into this graph about the relative popularity of each restaurant. It’s looking like Panera is on a strong upward trend, having broken away from California Pizza Kitchen back in 2004.
The younger Texas Roadhouse has fewer searches, but is growing at about the same rate as Panera, although there is a pretty sharp upturn in Panera searches in the latter part of the graph.
Searches for California Pizza have been pretty level for the past three years.
Here’s another chart from Google Trends:
Now, the above chart is an interesting is showing the relative number of searches for each company’s respective stock tickers. Notice the sharp spike in TXRH searches in early 2006. This might correspond to when Jim Cramer mentioned the stock on Mad Money, as I vaguely remember him talking about it once. I did an acronym search for TXRH and couldn’t find any other uses of this combination of letters, so we can be pretty confident that there were a lot of people searching for this stock back in February-March.
Perhaps more interesting though is the news data shown in the lower graph. I’m not completely up-to-speed on what this graph is exactly showing, but you’ll notice that only PNRA shows up here. Google also showed a number of news items for PNRA corresponding to dates of the flags (A, B, C, D, E) in the upper graph. A search for just PNRA (or just CPKI) doesn’t show a trends graph since there is so little data. However, PNRA comes up a lot in the news feeds where TXRH is nowhere to be found.
Investor’s Conclusion
Based on just the Google Trends graphs, I’d have to say PNRA is the momentum play here. TXRH has strong growth as well. Also, since TXRH is further under the radar, you might be able to catch a better deal. But then what was that spike in traffic back in early 2006; watch out for the Cramer effect. As for CPKI, too flat to consider trading.
Below are some (perhaps more familiar) charts for the same stocks. What do these charts tell us? Is it the same story? I’ll post in the comments later.
Other Resources
Try out these other sites for more potential research data. I imagine an indicator composed of all of these sources could be pretty powerful at predicting a company’s “image” health. For web companies especially, the data is relavent considering the number of links to and searches for a site can directly correspond to the amount of advertising revenue generated.
– Google Trends: Graphs of Search Data
– Alexa (click on “traffic rankings”): Website Traffic Data
– Linkdomain Searches at Yahoo (search for “linkdomain:sitename.com”): Number of Inbound Links to a Site
– Social Meter: Combination of Different Popularity Indicators on the Web