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Stock Strategist

Could This Restaurant Stock Be a Four-Bagger?

The Babe Ruth Portfolio revisits the possibilities for an upscale chain.

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We believe  Ruth's Chris (RUTH) could become a big winner for the Babe Ruth Portfolio. (For more on our portfolio's philosophy, see "Bat Like Babe Ruth.") The chain is a leader in the growing upscale steakhouse segment, with a respected and well-known brand built over the last 42 years. The company also has ample opportunities for expansion.

The stock, however, has traded off nearly 40% since our purchase in May 2007, largely on fears of a slowdown in consumer spending. We believe the market is being far too pessimistic. This is not to say that we are sanguine about the risks facing the company. It is certainly possible that the U.S. is headed toward a recession, which, if deep and prolonged, could potentially bankrupt Ruth's Chris.

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John Owens does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.