Restaurant Finance Monitor Stock INDXX
This chart is for illustration purposes only. Past performance is not indicative of future results.
Most stock market indices are defined with traditional formulas that are market cap weighted or even equally weighted. However, a market cap weighting in the restaurant industry skews too much towards the large brands such as McDonald's and as such, the top six-10 companies drive the performance. An equal weighting formula gives no consideration to market share and importance.
About the Restaurant Finance Monitor Index
The Restaurant Finance Monitor INDXX index follows a strict rules-based methodology that weights QSR and Fast Casual at 70% with full-service making up the balance. The index methodology requires minimum market cap requirements, which historically have narrowed the number of restaurant companies available in the index universe to between 65 and 40 companies. The index is rebalanced each quarter pursuant to its methodology, at which time using two proprietary quantitative screens it sidelines six companies that are showing relative underperformance versus the index. As for total weightings in the index, historically the top five companies have each represented about 5-6% of the index, thereafter the next set of 20 or so companies have represented a range of 3-4% and the last of the group are between 2-3%. The index as of March 31, 2018, holds 29 names which is in the middle of the range of between 23-34 names.
Who Could Benefit From Using the Restaurant Finance Monitor Index?
We believe that the index represents a fair proxy to measure stock performance for the restaurant industry which can be useful for Private Equity, CEOs and career minded people in the industry.
- Private equity and analyst could follow the index as a benchmark because it offers an independently verified and transparent 10-year benchmark to measure the stock performance of the restaurant industry according to the capital markets. The index is geared to overweight the leaders in the industry and underweight the weaker players but on a measured basis. Put simply, it is performance driven and not market cap weighted so the returns are more reflective of the broad industry performance and is not overly tilted towards the largest brands.
- Similarly, restaurant owners and CEOs of publicly traded companies will find value in monitoring the index because the methodology is transparent and should help highlight from a competitive front those public companies that have momentum and those who are falling on harder times.
- Career minded people and consultants in the industry should also pay attention to the index as it puts into context how the industry is performing.
- Lastly, portfolio managers broadly looking at the economy and doing sector analysis should pay attention to the index. The restaurant industry tells a story about issues within the economy such as demographic trends, consumer spending, small business, regulation, and food inflation. There are many disruptive trends occurring in the restaurant industry and the Restaurant Finance Monitor INDXX a useful tool to track such changes.
Index Founder: Dan Weiskopf
The information provided is not meant as a recommendation for any security and is solely the opinion of Dan Weiskopf and not IPI Wealth Management which have no affiliation with Access ETF Solutions. The available information is from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Securities and investment advice offered through Investment Planners, Inc. (Member FINRA/SIPC) and IPI Wealth Management, Inc., 226 W. Eldorado Street, Decatur, IL 62522. 217-425-6340. Past performance is not indicative of future results. It is not possible to invest directly in an index as it is used to represent market performance only. Indexes are unmanaged and do not reflect fees, expenses, or sales charges.