WING

ICYMI: Valuentum’s Brian Nelson on the Latest Howard Marks’ Memo: “Something of Value”

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Valuentum’s President of Investment Research Brian Michael Nelson, CFA, explains why there are not really value and growth stocks, why most of the research in quantitative finance is spurious and needs to be redefined on a forward-looking basis, and why enterprise valuation (not the efficient markets hypothesis) should be the organizing principle of finance. Nelson explains his views about valuation, what it means to be a value investor, and investing in the context of Oaktree Capital Howard Marks’ latest memo, “Something of Value,” January 11, 2021. Please don’t forget to give the second edition of the book “Value Trap” a 5-star rating on Amazon here. Thank you for your membership! —– Tickerized for holdings in the IWM. Valuentum members have … Read more

Chipotle, Domino’s Continue to Deliver for Shareholders

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Image Shown: Domino’s Pizza Inc aims to grow its market share in the US by leaning heavily on its delivery and digital operations, a realm the firm has significant competitive advantages in, as compared to leaning on carryout operations at physical stores. Image Source: Domino’s Pizza Inc – January 2021 IR Presentation By Callum Turcan In the restaurant industry, one thing the coronavirus (‘COVID-19’) pandemic has made clear is that having drive thru operations, a strong online presence and efficient delivery services will be key to meeting consumer demand going forward. Physical restaurant locations that rely on indoor dinning will become relevant once again when the pandemic is contained, something the ongoing distribution of COVID-19 vaccines should help accomplish, but … Read more

Chicken Sandwich Wars Heating Up In the US

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Image Shown: Rivals in the quick-service restaurant space are aggressively competing for share in the fast-growing premium chicken sandwich category following Popeyes’ considerable success the past couple years. Source: Images/logos property of the respective companies. By Callum Turcan and Brian Nelson, CFA Nothing has been the same in the fast-food industry since Popeyes launched its first nationwide chicken sandwich August 12, 2019. The release of the delicious chicken sandwich from the company named after Gene Hackman’s character Popeye Doyle in the 1971 film The French Connection may even have changed the fast-food industry as we know it. Popeyes’ “tender all-white meat chicken breast fillet, marinated in (its) authentic blend of Louisiana seasonings, then hand battered and breaded in (its) all … Read more

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process

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With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company’s revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There’s a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.

McDonald’s Not on the Value Menu

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We can’t get anywhere close to McDonald’s share price with our discounted cash-flow valuation process. That doesn’t mean that shares are destined to fall, but it may indicate that the stock has pulled forward future returns. In any case, investors in McDonald’s should be cautious. By Brian Nelson, CFA McDonald’s (MCD) has done a wonderful job in years past, pursuing all-day breakfast and transitioning (even) more to a franchise business model, but these changes are now behind the fast-food restaurant. Our fair value estimate for McDonald’s is in the mid-$150s (its shares are trading over $200), and frankly, we’re having a very difficult time coming anywhere close to how high the market is valuing shares. During the firm’s second-quarter results, … Read more

Comps Accelerate and Margins Expand in Chipotle’s Third Quarter

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Image Source: Mike Mozart The once beaten down fast casual restaurant chain Chipotle is back to delivering solid comparable restaurant sales growth thanks to menu price increases, and restaurant level operating margin expanded significantly as lower marketing and promotional spending was required to appease cautious consumers. By Kris Rosemann Simulated Best Ideas Newsletter portfolio idea Chipotle (CMG) reported 8.6% year-over-year revenue growth in the third quarter of 2018, results released October 25, driven by new store openings and a 4.4% increase in comparable restaurant sales. Average check moved higher from the year-ago period due in part to a 3.8% effective menu price increase but was partially offset by a 1.1% decline in comparable restaurant transactions. This weakness in traffic was … Read more

Dividend Increases/Decreases for the Week Ending August 3

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Below we provide a list of firms that raised their dividends during the week ending August 3. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week American States Water (AWR): now $0.275 per share quarterly dividend, was $0.255. Andeavor Logistics (ANDX): now $1.03 per share quarterly dividend, was $1.015. Ares Capital (ARCC): now $0.39 per share quarterly dividend, was $0.38. Astec (ASTE): now $0.11 per share quarterly dividend, was $0.10. BP (BP): now $0.615 per ADS quarterly dividend, was $0.595. BP Midstream Partners (BPMP): now $0.2725 per share quarterly dividend, was $0.2675. … Read more

Restaurant Traffic Down, Chipotle Still a Favorite Idea

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Image Source: Chipotle (page 89 of 160) In late April of this year, we added Chipotle to the simulated Best Ideas Newsletter portfolio. By Brian Nelson, CFA We like Chipotle (CMG) for three primary reasons: 1) in CEO Brian Niccol, the company has a new bold visionary at the helm and he is hiring top talent to fill gaps, 2) buyouts in the restaurant space will only offer support for shares as the fast-casual segment remains a key focus area for private equity (here and here), and 3) Chipotle has been plagued with so many health issues (“foodborne illnesses”) in the past that, even with the recent bounce in shares, the market’s expectations are still rather low. Though our fair value … Read more

Buffalo Wild Wings Should Go Private and Hasbro Should Buy Mattel…But at the Right Price

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Image Source: Hasbro There is a lot happening across the M&A landscape as of late. Buffalo Wild Wings has reportedly received a go-private offer, while speculation is swirling that Hasbro is looking to gobble up Mattel. We like the prospects of both scenarios. However, price will always matter. Buffalo Wild Wings should hold out for the very best offer, while Hasbro should be very careful not to overpay for assets that may be past their prime. By Brian Nelson, CFA Buffalo Wild Wings (BWLD) has long been a favorite of ours. You have to read, “3 Reasons Why Buffalo Wild Wings Is a Long-Term Winner” from July 2015. Certainly the beer, wings and sports establishment is facing a host of … Read more

Best Ideas, Dividend Growth Newsletter Alerts and More

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Image Shown: The stock price performance of Boeing. Let’s take a look at recent news from newsletter portfolio holdings. We’re also parting with a “trade” we never should have made in the first place, and we’re letting go of one of our favorite restaurants in light of deteriorating technicals. This and more… By Brian Nelson, CFA Aside from predicting the ongoing inflation of the current equity market bubble in the US so far in 2017, we also thought crude oil prices (USO) would continue their recovery. Unfortunately, this hasn’t exactly worked out, and US crude oil prices have now entered a “bear market,” now falling below $43 per barrel. Are we saying that we know where crude oil prices are … Read more