Jim (cont'd):     

Really, this is the inductive reasoning thing that I used to do as a hedge fund manager. And I say what an opportunity to do the work, with the stock hammered mercilessly today, down $3.35 to $48, routed along with all sorts of consumer spending plays.

Why do I think that this one fits the current macro world view that is so necessary to have if you're going to invest?... You always want to look around before you pick an individual stock...

Well let's look at the key variables...

Now that gas prices have fallen to $1.66 a gallon, people are indeed dealing better about driving to a place like PNRA... and it got a little bit more money in their pockets. It's a little bit more upscale than some of the fast food places...

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Panera Bread Co. (PNRA), meanwhile, should benefit from these lower commodity prices that we keep reading about... Wheat prices fell 5.4% year-over-year in the third quarter, and expected to fall another 30% year-over-year in the fourth quarter... The USDA is saying that domestic wheat prices continue to be in freefall through November and into December, reaching their lowest level in a couple of years.

Food and paper costs make up about 36% of PNRA's total operating costs. That's 36% of their raw costs... so the collapse of wheat... that's a boon for them.

How about paper?...

Paper prices are down big... pulp, the fundamental of paper, is down 15% since August. Actual spot prices are even lower... This stuff is cheaper to make...

Meanwhile, PNRA is raising prices, even as its costs shrink... Management expected on that price increase of 6% in the fourth quarter.

This is one of the few restaurant chains that is actually thriving in this environment.

Analysts expect PNRA's operating income to grow by 16% in 2009, compared to 6% growth for Chipotle Mexican Grill, 1% for Jack in the Box - which, by the way, I like - a 37% decline for Red Robin, a 5% decline for California Pizza Kitchen... and a 1% decline for Sonic.

PNRA has no debt... and $31 million of cash on hand... It should generate $70 million of free cash flow next year. That matters, because you can't borrow money these days to grow a restaurant chain. Banks don't want to lend it to you. But we've got a lot of space freeing up to grow that kind of business, and PNRA will be one of the few companies that can finance its own expansion, without needing to borrow.

And, unlike its peers, PNRA is not a candidate for tax loss selling... something that drives down a lot of stocks at this time of year.

Because its stock ended last year at $35.82, and now it's at $48.15. That's right, PNRA is up in 2008... it's up 34%!... and it's up 15% since the last time we heard from the company's CEO on October 22... right after PNRA reported its third quarter, when the stock was at $42.21...

Plus, we've got a great entry point... the stock off 6.5%... and possibly off higher than expected because of jobless claims. In this market, who knows?...

PNRA has all the writing gradients to really be a big winner here. But, you know what?... Sometimes, I get taken in by a stock that has had a big gain already, and maybe I'm late... maybe I'm wrong about the circumstances... maybe things are gloomier than I think... I am surrounded by gloom, so let's hear from the PNRA's chairman and CEO, Ronald Shaich, before we give it the thumbs up...

Mr. Shaich, welcome back to Mad Money...

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Jim's comments AFTER the interview:     Ron Shaich provides value. He's got lower costs year over year. This is what you're looking for in a difficult environment... a winning stock with a winning management! You've got a good one here.

[verbatim recap]