Yum! eyes huge growth in India
Already established in China, Yum! Brands (NYSE: YUM), operator of Pizza Hut, Taco Bell and KFC, recently outlined its growth plans for India. The company intends to open 1,000 fast-food outlets by 2015. While investors invariably think of China when it comes to overseas growth, they need to look at India, too.
Like China, India offers the promise of an exploding middle-class population. But India differentiates itself through the sheer size of its youth population – the median age in India is 25, and a stunning 30 percent are under 14 years old. These are young consumers preparing to make their first foray into the work force, and they represent potential lifelong customers. Aligning with India’s youth culture presents an exciting growth proposition for companies.
Yum! is already huge in China, where it makes about a third of its operating profit. While its current footprint in India is relatively small, it has done an excellent job adapting to China, a skill that should help it in other emerging markets.
India needs major boosts in infrastructure, education and health care, all of which should offer excellent investment opportunities. The McKinsey consultancy estimates that private consumption in India should quadruple from 2005 to 2025.
If Pizza Hut, Taco Bell and KFC snare even a small piece of the growing consumption pie, Yum’s bottom line should benefit.
Ask the Fool
Q: What percentage gain should I shoot for with a stock? When should I sell? – S.H., Mansfield, Ohio
A: Instead of thinking of percentages, consider whether the company is still executing well. Many people bail out after a particular gain, such as 10 percent or 30 percent. But it’s often more profitable to hang onto the stock for years or decades, as long as it keeps growing and you retain faith in it. You would have regretted selling Microsoft shares in 1990 after a 100 percent gain, right? It would have kept doubling your money for many years. Don’t hang on blindly, though. Follow the company’s progress and prospects.
Q: Is there a best time of day, week, month or year to buy or sell stock? – P.W., Baton Rouge, La.
A: Don’t look at your watch or calendar for that – look to your notebook or noggin. Ask yourself if you’ve done enough research to determine that the company is financially healthy and growing, has sustainable advantages over its competitors and has a promising future. Then determine whether the current stock price offers a good chance of growth. Some terrific companies might be priced so high that it’s hard to rationally imagine them advancing much more in the next few years.
Evaluating a company’s fair value is not easy, though. Measures such as price-to-earnings (P/E) ratios and price-to-cash-flow ratios can help, but in order to keep improving your results, aim to keep learning more about investing. You can do so at www.fool.com/ how-to-invest and at Morningstar.com.
Once you’re confident that you’ve found a great company selling at a good or great price, that’s the best time to buy.
My dumbest investment
My dumbest investment has been keeping too much of my 401(k) money in my employer’s stock. Shares have fallen from $47 in February 2007 to close to $1 recently. I accumulated a lot of shares over 20 years. I knew the dangers of having too much 401(k) money in company stock, but I thought my company was solid, so I chose not to do anything about it. Now, of course, I wish I’d sold at least some. This has been an expensive lesson. – Pete Brown, Holt, Mich.
The Fool responds: Ouch. It’s a common temptation to invest 401(k) money mainly in your employer’s stock. The fact that you presumably know so much about the firm is indeed valuable and does give you an edge over other investors. But still, you probably don’t know everything, and even well-respected companies slump or stagnate for a period, while some even go out of business. You might even steer clear of company stock entirely – after all, you already have great financial exposure to it, as you depend on it for your paycheck.