The Stock Market Says Taco Quality Is Poised for Rapid Improvement

A blog about business and economics.
Feb. 28 2014 12:13 PM

Efficient-Markets Hypothesis Says America Is Poised for Better Tacos

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German tacos in Kreuzberg.

Photo by Sean Gallup/Getty Images

Some friends and I were lamenting the sorry state of the D.C. area's taco offerings, and I observed that if Taco Cabana were to expand to the area, it would crush the competition. Not because Taco Cabana is the single greatest taco in the universe or anything, but it's a taco chain that's had to cut its teeth amidst the taco plenty of Texas. It has managed to bring to scale a homogenized chain taco concept that can plausibly go head-to-head with a robust taco culture.

So I've often thought that if and when they ever expand to the people-dense, taco-poor Northeast Corridor, they will clean up.

In fact, I even considered investing in the company on those grounds. But then I remembered the First Rule of Picking Stocks is: Do not pick stocks. The Second Rule of Picking Stocks is: Do not pick stocks. The third rule is look up the current price-to-earnings ratio and see what financial markets are already assuming. In the case of the Fiesta Restaurant Group that means a 129 PE ratio (average would be about 15), which is really high. That means investors are optimistic about FRG's growth opportunities. Like they've noted that this is a regional chain that's very successful in a core taco market and reasonably likely to be a smashing success on a national basis.

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Which is to say that if the efficient-market hypothesis is correct, America is poised for a massive expansion of quality tacos. It's an exciting time to be alive.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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