Surveying Valuentum Buying Index Performance in the Restaurant Space

The stock-selection methodology, the Valuentum Buying Index, is as simple as an efficacious stock-selection methodology can be. However, that doesn’t mean that the Valuentum Buying Index is simple. The Valuentum Buying Index considers the rigors of a discounted cash-flow process, the considerations of relative valuation techniques, and the transparency of pricing information via market indicators.

Yet despite its straightforwardness, the Valuentum Buying Index casts a discerning eye on the equities it monitors. The Valuentum Buying Index does not make a ‘call’ on every company. It only views a 9 or a 10 on the measure to be actionable on the long side, and it only views a 1 or 2 on the measure to be actionable on the short side. And only the best ideas included in the Best Ideas portfolio and Dividend Growth portfolio can be considered our best ideas at any given time. The Valuentum Buying Index’s breadth may be unmatched, and its sorting mechanism may be unrivaled by any other methodology.

Within the restaurant industry, long ideas highlighted by the Valuentum Buying Index and/or included in our Best Ideas portfolio averaged a 118.6% return over the measurement period (1), while short ideas registered 58.5 percentage points of underperformance relative to the average restaurant return (2). The Valuentum Buying Index identified 2 out of the top 4 best performers—Buffalo Wild Wings (BWLD) and Cracker Barrel (CBRL)–as long ideas and the worst performer as a short idea—BJ’s Restaurants (BJRI). Though there is always room for better performance, we applaud the Valuentum Buying Index for its high marks in the restaurant industry.

(1) The performance of long Best Ideas portfolio holdings is measured by comparing the price at the date they were added to the portfolio to the price of the date that they were removed. If they are still holdings, the current price is applied. The performance of firms that register a 9 or 10 on the Valuentum Buying Index and were not included in the Best Ideas portfolio is measured by comparing the price at the date they registered a 9 or a 10 to the price of the date they registered a 1 or a 2. If they have not registered a 1 or 2 after registering a 9 or 10, the current price is applied. A simple average of the performance of portfolio holdings and firms registering a 9 or 10 on the Valuentum Buying Index results in a 118.6% return.

(2) The performance of firms that register a 1 or 2 on the Valuentum Buying Index and were not included in the Best Ideas portfolio is measured by comparing the price at the date they registered a 1 or a 2 to the price of the date they registered a 9 or a 10. If they have not registered a 9 or 10 after registering a 1 or 2, the current price is applied. A simple average of the performance of short portfolio holdings and firms registering a 1 or 2 on the Valuentum Buying Index results in a 4.5% return. The average restaurant return is measured from July 13, 2011 to present. The start date was chosen to match the date Best Ideas portfolio holding Buffalo Wild Wings was added to the portfolio. The average restaurant return over this time period was 63%. 4.5% less 63% equals 58.5%.

Historical Valuentum Buying Index information for each company is included on page 16 of each respective report.