Market's at a feast, but not on my restaurant stocks
The 'brand name' restaurant stocks I've bought have done poorly overall, but I am still holding.
Schlotzsky's (BUNZ). Purchased late October under 10; now 11+. My favorite in the group. As I posted on the Value thread, BUNZ is a company "vaguely kinda/sorta" like INDQA, which I owned a couple of times also. It was later bought by Warren Buffett, The companies are similar in that they both make a lot of their money from the franchising end. BUNZ is of lesser quality IMO than Dairy Queen though, because the DQ's have some moat protection (they were dominant in small towns, plus they have at least one unique and popular fast food item (their "Blizzard"). BUNZ recently reported increased earnings and sales, and the stock has risen a bit.
Advantica (DINE). Bought 12/98 a little under 5. It's selling back there again. Lots and lots of debt, but lots of cash/cash equiv. on hand too. A company back from bankruptcy. But their Denny's, Coco's, El Pollo Loco,chains are ubiquitous. In some small towns, Denny's is the restaurant of choice for locals and travelers. Question is whether the management team can make and keep this company profitable with all the debt they have to service (and not err in deploying the cash they have.)
Landry's. (LDRY) Bought in 8-9 range 11-12/98. Currently 5. Tangible book value maybe about $14/sh. Little LTD. Lot of insider ownership. Seems to be an erratic performer- business as well as the stock. In a discussion on this stock last year in the Value thread, this chain was contrasted to STAR (Lonestar Steakhouse/Saloon chain). I thought LDRY was the much better buy because steak places seemed to be everywhere and STAR was suffering at the hands of OSSI, and other chains. LDRY, as a seafood specialist, I felt was somewhat isolated. I've tracked both stocks since. LDRY's has almost been halved while STAR has gone up by 1/3. So I've been very wrong on both stocks.
DANB (Dave & Buster's) is not correctly a restaurant chain; it occupies some special niche in the sphere of entertainment-with-food concept. Their places are very popular and crowded, and with apparently much repeat business. It's a place where it's easy and convenient for patrons to spend money - games/food/drink. I established a position in DANB between 11/98 and 1/99 at prices in the 18+ to 22+ range. Stock now is at 21+.
DANB is a stock I can't justify owning, but a stock I want to own. Maybe it's about GARP - growth at a reasonable price (although, the pe ratio is high by my standards). It's still a small chain, gangbuster growth in sales, uniquely executed business, expensive for competitors to duplicate. I think as they build out and get a wider following, the stock will rise to reflect the success and opportunities they have. It's my largest 'restaurant' position.
At this point, the only thing for sure and the only thing I am right about is that when I say, 'I've been wrong many, many times before'... I am definitely correct about that -g-.
Paul Senior |
