We started Buffalo Wild Wings with a 2.5% stake in the low $38s. Much like the airlines, or any retailer at this point we face the danger of "chasing" a stock after a huge move - but this price action seems relentless - I thought the same thing a few days ago and only watch these stocks move up and up. Right now the name of the stock is immaterial - be it a casino, clothing store, or restaurant - it's all "one big trade" - the anti-oil trade. For those few of you who still delve into the black magic arts... otherwise known as fundamental analysis.... here is why, unlike the junk that is flying up 25% a week, I can at least (somewhat) sleep at night with BWLD in the portfolio. Keep in mind chicken prices should appreciate considerably in the year ahead but the market could care less right now. You do have to respect the fact they can continue to see strong same store sales growth in a down economy.
- Restaurant operator Buffalo Wild Wings Inc (BWLD) posted a 46 percent rise in quarterly profit, beating market estimates, and said it was confident of achieving its targets for 2008, sending its shares up 13 percent.
- Several initiatives like stores remodeling and marketing the company has taken appeared to be working and boosting sales, Morgan Keegan & Co Inc analyst Destin Tompkins said by phone.
- The operator of Buffalo Wild Wings Grill and Bar restaurants earned $5.6 million, or 31 cents per share, for the second quarter ended June 29. It reported a profit of $3.8 million, or 22 cents per share, last year.
- Total revenue rose 29 percent to $97.9 million, said the company
- Same-store sales increased 8.3 percent at company-owned restaurants and 4.5 percent at franchised restaurants. Buffalo Wild currently operates 521 restaurants in 37 states.
- Average weekly sales for company-owned restaurants rose 10.7 percent to $40,572 for the second quarter, while franchised restaurants averaged $46,390, up 5.4 percent from the year-ago period.
- "(Chicken) wing prices remained relatively low during the quarter and at least to date, have not increased. So, they continued to be favorable for the company," Tompkins said.
- For 2008, the Minneapolis-based company said it was confident of achieving its targets of net earnings growth of 25 percent, revenue growth of 20 percent, and unit growth of 15 percent.
Jul 30 WSJ Article
Valuation is very rich at 27x forward earnings but since people don't want fertilizer at 7x forward earnings we need to pay up for the hottest stocks in the market ;) Aye carumba. We continue to make quite serious changes to the fund - until people wake up and figure out lower oil prices are signaling serious weakness in global economies - this is the "trend" to ride. The 1 year high is $42 so I'd expect the stock to stall out there.
Long Buffalo Wild Wings in fund; no personal position
6 comments:
I went to BWW for lunch last week. I dont go very often. There weren't as many people there as I expected. Its in competition with Taco Mac for the chicken wing dollar. The place used to be crowded but doesn't seem that way lately. I think it will do well in the next few months when football kicks in. Good looking waitresses though ;-)
Mike, great due diligence - please send photos to back up your evidence ;)
It's not really a lunch place in my experience - more of evening and weekends.
I agree - its a great place for the best time of the year - football season.
This is sort of like my homebuilders and retailers - I don't believe in the trend - and for all I know i could of top ticked this stock. I'm just working on creating a more balanced exposure across sectors, even the ones I don't believe in. THis market changes its mind by the day/week on what it wants to run up and while our narrow focus has worked for 10 months, the past 2 it has not worked so adjusting on the fly.
If you want to do more due diligence please check out symbol RICK and I will allow you you an unpaid visit there too ;)
"Valuation is very rich at 27x forward earnings but since people don't want fertilizer at 7x forward earnings we need to pay up for the hottest stocks in the market ;) Aye carumba"
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Mark,
this market is a joke. have you ever seen it this irrational in terms of undervaluing good stuff?
I mean it always is irrational in overvaluing bad stuff (bubbles) but this is insane.
I have a new way of looking at it which is just adds to the frustration
Invert the PE's.
The fertilizers at 6-7PE's (as you said) have like 15-16% earnings yields on forward numbers, and they have less debt so that can be pure dividend. If earnings are to get miraculously cut into 1/3 they still would yield 5-6% on earnings...and assuming a 2/3 cut in earnings is pricing in everything (risk is removed) but the sun exploding.
the 5-6% yield still beats treasuries by a large margin.
does the market realize that 27X forward numbers is like 3-4% yield..which is like a treasury and there's so much risk in BWW as opposed to sitting in a bond.
wow, how do these hedgie guys get paid like 20-100X a normal economist salary?? They earn their money less than analysts.
this world/society is a joke.
read (6) for fertilizer :
http://www.istockanalyst.com/article/viewarticlepaged+articleid_2493509~pageid_1.html
Bill - no nothing like this. 2002 was again bad but that was mostly everything at depressed values
you did not see this sort of 180 degree about faces
Oa,
thats Don Coxe who I respect and agree (mostly) with - you can search the blog for his name
The difference between a strategist and actual fund manager is in the details. I have the same thesis as him but by following said thesis I've been losing money hand over first for 2 months now.
So I can say the same things, but that is not helping me make money right now. It is quite amazing to see what is going on in these markets.
I don't mind being wrong - but I prefer to be wrong for earnings misses or missing a trend or something. This is sort of like the Wizard of Oz behind the curtain sending waves of sell orders at everything we own :)
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