Tag Archives: food

Did Restaurant Earnings Impact This New ETF?

With the introduction of the new Restaurant ETF (NASDAQ: BITE ) at the end of last month, time has come to evaluate the impact of the recent spate of restaurant industry earnings on it. Most of the restaurant stocks delivered better-than-expected earnings and rising same-store sales (comps) in the last reported quarter. The upbeat results definitely speak about the strong fundamentals of the industry. Low fuel cost, an improving U.S. economy, rising consumer confidence, higher consumer spending and better job prospects all bode well for the restaurant industry. Let us take a quick glance at some of these results. Restaurant Earnings in Detail McDonald’s Corporation (NYSE: MCD ) posted earnings per share of $1.40 for the third quarter that beat the Zacks Consensus Estimate of $1.27 by 10%. Earnings, in constant currencies, grew 44% year over year driven by decline in total costs and expenses and a lower share count. Revenues of $6.62 billion declined 5% year over year due to currency headwinds but grew 7% in constant currencies, beating the Zacks Consensus Estimate by 2.7%. This was driven by comps growth at all its segments. The maker of hamburgers and fries expects comps to grow in the fourth quarter as well. Starbucks Corporation’s (NASDAQ: SBUX ) adjusted earnings of 43 cents per share in the fourth quarter of fiscal 2015 missed the Zacks Consensus Estimate of 44 cents by 2.3%. However, earnings were on the higher end of management’s guided range and grew 16% year over year as solid top-line growth offset lower margins. Sales rose 18% to $4.91 billion, outpacing the Zacks Consensus Estimate of $4.89 billion by 0.5% driven by robust comps. Global comps growth of 8% was higher than a 7% rise in the previous quarter, driven by increased traffic trends. The company expects revenues to grow more than 10% in fiscal 2016, excluding the extra 53rd week. Comps are expected to grow somewhat above the mid-single-digit range. Buffalo Wild Wings Inc.’s (NASDAQ: BWLD ) third-quarter results were disappointing. The restaurant operator’s adjusted earnings of $1.00 per share fell 12.2% year over year and were short of the Zacks Consensus Estimate of $1.28 by 22% owing to higher food and labor costs. Despite a 22% increase, the company’s revenues of $455.5 million missed the consensus estimate by roughly 1.8%. It also expects single-digit net earnings growth for 2015 compared with 13% growth expected previously. The Wendy’s Company’s (NASDAQ: WEN ) adjusted earnings came in at 9 cents per share, exceeding the Zacks Consensus Estimate by 12.5% and year-ago earnings by 28.6% driven by lower expenses and improved margins. Total revenue of $464.6 million beat the consensus mark of $442.0 million by 5% but declined 6.5% from the prior year. The company marginally revised its earnings, EBITDA and comps guidance for 2015 on the basis of strong year-to-date operating results and encouraging response to the 4 for $4 promotion that began in October. ETF Impact Strong results notwithstanding, the performance of restaurant stocks has not been commensurate due to several headwinds like the threat of higher labor costs due to demand for rising minimum wages, price wars, strong currency and a slowdown in the Chinese economy. This found a reflection in the performance of BITE, which exclusively focuses on this industry. The fund has tumbled 5.8% since its launch (as of November 12, 2015). Except McDonald’s and Starbucks, nearly all the stocks in the fund’s top 10 holdings nosedived in the past one month. Investors, therefore, should exercise caution before hopping into this niche ETF and closely monitor its price movements in the coming days. Let us take a look at this ETF in greater detail. BITE tracks the BITE Index, which is an equal-weighted index comprising 45 publicly-traded companies in the U.S. The fund’s holdings include some of the renowned companies in the restaurant industry that operates a broad variety of restaurant formats raging from quick serve and fast casual to casual dining and fine dining. The fund’s top five holdings include McDonald’s, Starbucks, Carrols Restaurant Group Inc. (NASDAQ: TAST ), Chuy’s Holdings, Inc. (NASDAQ: CHUY ) and Ruth’s Hospitality Group Inc. (NASDAQ: RUTH ). Together, the top 10 holdings occupy 27.6% of the fund’s assets. BITE has net assets worth $2.4 million and is thinly traded with an average volume of around 5,000 shares per day. The fund is a bit expensive with 0.75% in expense ratio. Original Post

RSX – October Review: First Positive Month After 5 Months Of Declines

Summary RSX grew by 6.4% in October, after 5 consecutive months of losses. The Bank of Russia expects that the inflation rate should decline by half by late 2016. If the prediction of lower inflation is correct, the Bank of Russia will start to cut the interest rates notably. The October Russian share market optimism may evaporate rather quickly if it won’t be supported by a positive oil price development. After five consecutive months of losses, share price of the Market Vectors Russia ETF (NYSEARCA: RSX ) increased in October. During the first half of the month, RSX grew from $15.7 to $17.75. Although it declined to $16.71 during the second half of October, RSX finished the month up by 6.43%. The growth was fueled by slightly higher commodity prices in early October. Although oil and metals prices started to decline again in late October, the share market was supported by an improved economic outlook. The minister of economic development said that Russian GDP should decline by 3.9% in 2015 but it should grow by 0.7% next year. Russia still has trouble with a high level of inflation that stands at 15.7%. But the Bank of Russia expects that the inflation rate will start to decline steeply by early 2016. If this prediction turns out to be right, the Bank of Russia will keep on cutting the interest rates. These expectations helped to support the Ruble exchange rate as well as the Russian share market. Also the situation in Ukraine is calm, there are no major fights anymore. Some significant changes regarding RSX’s composition occurred in October. Sberbank ( OTCPK:SBRCY ) became the biggest holding when the steep growth of the share price lifted the weight of the biggest Russian bank to 8.16%. Also weights of Gazprom ( OTCPK:OGZPY ) and Lukoil ( OTCPK:LUKOY ) increased. Weight of the biggest Russian food retailer, Magnit, declined from 7.31% at the end of September to 6.59% at the end of October. The Top 15 holdings represent 75.34% of RSX’s portfolio. Source: own processing, using data from vaneck.com Russian shares did very well in October. The biggest winner is Yandex (NASDAQ: YNDX ). Shares of the biggest Russian search engine provider rocketed by 50%, as the Q3 results have beaten expectations, the company has increased its 2015 guidance, and it has become the default search engine for Windows 10 in Russia, Ukraine and Turkey. Shares of the two biggest Russian banks, Sberbank and VTB, grew by 24% and 9% respectively. On the other hand, shares of Magnit lost 4.71% of value, as the food retailer announced a decline of net income by 28% y-o-y. Source: own processing, using data from Bloomberg The chart below shows the 10-day moving correlations between RSX and oil prices represented by the United States Oil ETF (NYSEARCA: USO ) and between RSX and the S&P 500. During the first decade of October, RSX grew along with USO; however, after USO began to decline, it didn’t drag RSX down. Similarly, RSX didn’t react to the jump of oil prices in late October. As a result, the correlation between RSX and USO was relatively low during the second half of the month. The correlation between RSX and the S&P 500 was very high and stable from late August to the middle of October, but it has declined rapidly over the last two weeks. It means that as a result, RSX was moving in its own direction over the last decade of October, without taking into account the oil market or the global financial market developments. Source: own processing, using data from Yahoo Finance The volatility of RSX was relatively high during the first half of October, but it declined significantly in the middle of the month and the end of October was relatively calm. On the other hand, as shown by the chart below, the Russian share market is highly volatile and the volatility eruptions are relatively regular. Source: own processing, using data from Yahoo Finance Some of the more interesting news: Yandex reported better than expected Q3 2015 financial results and increased the 2015 guidance. Yandex also announced that it added an online video streaming service to its film and TV recommendation service. An important news came on October 13, when Yandex announced that its search engine will become the default homepage and search engine for Windows 10 in Russia, Ukraine, Turkey, Belarus, Kazakhstan and several other countries in the region. This strategic partnership may help Yandex in its fight with Google (NASDAQ: GOOG ) (NASDAQ: GOOGL ), over market share in Russia. Norilsk Nickel ( OTCPK:NILSY ) announced that since the start of its buyback program, it purchased 1,186,534 ordinary shares for a total amount of approximately $186 million. The company has also announced a successful placement of $1 billion in eurobonds . The 7-year bonds bear an annual interest rate of 6.625%. Norilsk Nickel has also secured a $1.2 billion credit facility from Sberbank. Via an asset swap , Gazprom strengthened its position in the European gas storage and sales segment. It has also expanded its exploration and production activities in the North Sea. Gazprom also started construction of the Ukhta-Torzhok-2 gas pipeline that will feed natural gas to Nord Stream 2. Polyus Gold announced that the Independent Committee of the Board reiterated its opinion that the takeover offer of $2.97 per share offered by Sacturino Limited is too low. Lukoil announced that it discovered a large gas field in the Romanian deep sea offshore. Drilling intersected a 46-meter thick productive interval. The seismic data indicates that the area of the gas field can reach up to 39km 2 and it may contain 30 billion m 3 of natural gas. The voices against the anti-Russian sanctions keep on growing. The President of the European Commission, Jeaun-Claude Juncker declared that Europe must improve its relationship with Russia: We must make efforts towards a practical relationship with Russia. Russia must be treated decently. We can’t let our relationship with Russia be dictated by Washington. Conclusion Some positive macroeconomic news, the stabilized RUB/USD exchange rate and little higher oil prices supported RSX in October. Also the political situation keeps on improving as the situation in Ukraine is calm and some of the EU representatives indicate that the anti-Russian sanctions may end soon. But also stronger oil prices are important for further growth of RSX’s share price. If the oil price keeps on improving, November may be positive for RSX as well. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

The Grandma Approach

Summary Don’t be afraid to take a long-horizon approach to investing. Invest in what you know and understand. Always do your due diligence. Introduction Recently I’ve had several conversations with my grandma that caused me to question everything I’ve ever learned about investing. My sweet grandmother is an incredibly intelligent and humble lady. She has the unique ability to light up any room with her infectious smile and unassuming attitude. On Saturdays she spends time at garage sales looking for deals, and on Sundays she attends church, likely praying for the well-being of her rebellious family. Before she retired, she was a communications professor at the University of Texas. What was she not? She is not a financial guru or valuation genius. I don’t think she knows what a price to earnings multiple is, she doesn’t know what EBITDA stands for, and I can definitively say she doesn’t build her own DCF or comps models. Regardless, my grandmother and grandfather took up investing after retiring from professional life. My grandpa primarily is a dividend investor who averages about 4-5% returns year over year on low beta stocks. My grandmother on the other hand has been very willing to take on risk, and she has averaged an absurd 35% average annual return over the last 20 years. In the last year and a half alone she has made a 100% return. When I heard this, I first apologized for spitting out my coffee all over my shirt. Then as I did my laundry, I ruminated over my disbelief and resolved myself to conduct an independent research study on my grandmother. I was determined to know how someone with almost no financial background could so handily outperform some of the most seasoned investment professionals. The Grandmother Approach After hours of discussion, I determined my grandmother has three main criteria when investing She must personally like and use the products or services of the underlying company regularly in her own daily life She doesn’t focus on quick profits, valuation theory, or macro-economic hearsay She buys and holds a stock as long as she likes what the company sells or provides, and she subsequently liquidates her shares when she no longer cares for whatever product or service the underlying company peddles And that’s about it. She might hold a stock forever if she likes what they do. She has no timetables, and she doesn’t really care much about balance sheets. She is a firm focused trend investor with the patience you might expect from a teacher and a mother of three children. You can scoff at her approach, but the truth is she has outperformed the market for the last 20 years. So, for the sake of money, let’s give grandma the credit she deserves and maybe try to learn from her approach. I’m going to go into more detail now about her historical picks, why she decided to buy, and when she finally decided to sell. Hopefully I’ll verbalize an actionable way we too can follow in Grandma’s footsteps. Grandma’s Winners I have decided to include a select sampling of certain stocks she has owned. If this article garners interest, I may choose to included more of her stock picks. It is true that I noticeably am covering a time frame exemplified by ever increasing stock valuations (and possibly artificially inflated returns), though it should be noted that grandma outperformed the market from 2008-2010 as well. Cracker Barrel (NASDAQ: CBRL ) Enter : April 11, 2012 @ 56.20 “Grandpa and I always love to eat at Cracker Barrel when we take road trips. Their service is very good, and the parking lot is always full. Also, Cracker Barrel is always full of people like grandpa and I.” I believe the “people like grandpa and I” comment meant elderly people. After talking to grandma, I did my own due diligence to check if she was correct. The parking lot was in fact completely full, and the target demographic was indeed, shall we say “a little greyer.” I received my chicken and dumplings within 10 minutes, had some coffee, paid for my food, and left within 30 minutes. Granted I visited only one Cracker Barrel in the middle of rural Georgia. However, My grandmother and I reasoned that she had visited around 90 unique locations and assured me her experience was similar each time. 90 of 500 locations within the US is an 18% sample size which frankly was large enough to equal a statistically significant sample group in my own mind. It was official, Cracker Barrel did operate like a well-oiled machine, and my grandma had recognized this fact and capitalized on it. Exit : July 9, 2015 @ 154.65 “I really like Cracker Barrel still, but grandpa has been telling me that the stock is overpriced. Jim Cramer didn’t seem too optimistic either.” It will be hard quantifying a statement like this, but let me try. I believe what she was trying to say is that she felt like she had realized a generous return on her initial investment and was satisfied with what she had returned. When everyone is saying a stock is overvalued, it may be prudent to listen to what they have to say. Result : 171.18% ROI over 3 years and 3 months before a 3.2% dividend. This translates to a 52.67% avg. annual unrealized return without dividend reinvestment. Takeaway : Remember, the grandma approach involves patience, a long horizon, and recognizing solid business. Cracker Barrel checked all these boxes for my grandma, so she invested (and committed to regularly eating/monitoring the performance of her company). I believe there is lot to be said for patience and commitment. Starbucks (NASDAQ: SBUX ) Enter : May 31, 2010 @ 13.26 “Grandpa and I go there all the time. I noticed that it was always full of young people, and I like that I can get little gifts. It seems like there are Starbucks everywhere!” This is largely hearsay and un-technical, but as a “young person” I can attest to the fluidity and convenience of Starbucks’ daily operations. This is largely intangible, but they also offer highly convenient free wifi, they pursue environmentally and socially conscious movements, they offer seasonal beverages (ex. hibiscus tea, pumpkin spice latte’s), they employ thousands, and personally (warning the following comment is highly subjective) I think there coffee is pretty good (albeit overpriced). I think personally, Starbucks’s successful high growth, socially conscious strategy has paid off well over the long term. Strictly from Grandma’s point of view though, Starbucks is: popular, convenient, and widely available. Currently Owns : October 31, 2015 (Present) @ 62.57 Recently, I’ve had conversations with grandma in which she has expressed concern about its value. She believes it is almost time to exit, but she does in fact still own all of her shares. She cited reasons such as its 52 week high, Jim Cramer, and (of course) grandpa. To be fair, SBUX is trading at a 35X P/E multiple with a mere 1.02% dividend. SBUX’s domestic growth opportunities are decreasing, and it will be interesting now to see how SBUX pursues global growth strategies. Considering the vast uncertainty regarding Starbuck’s future growth, it isn’t entirely unfair to see why grandma might have a point here. Result : 371.87% split adjusted return, annualized 68.65% return before its 1.02% dividend. I must say, I was blown away when I crunched the numbers. Cashing out would not be such a bad thing at this point. Takeaway : Popularity, patience, and positive customer experience. These key intangible (yet important) metrics indicate a well-run business/investment. There are hundreds of other reasons why Starbucks has been so successful, but for grandma I believe the three I just mentioned sum it up fairly well. Apple (NASDAQ: AAPL ) Enter : Nov, 1 2005 @ 9.69 “Your father bought me a fancy IPOD, but I couldn’t figure out how to use it for the longest time. I saw so many people buying them though that I knew it must be something special. I thought about it for awhile, and I read up on the company before I decided to buy shares.” It’s honestly hard to say she didn’t luck out on Apple. Apple is a fantastic company that has performed incredibly well. Right now I still think Apple is in value territory and could likely continue its seemingly endless upward trajectory (my opinion). I’ll assume she did her research well and realized Apple’s R&D/marketing was a true differentiator. Honestly I’m more blown away that she never decided to sell. Currently Owns : Presently 119.50 Honestly, holding a stock for 10 years seems like an eternity to me. Grandma calls Apple her “cash cow” and has never seen any reason to sell it. I think it’s fair to say that Apple makes just about anything look good. Apple products have transcended into status symbols in many cultures, and you’d be hard pressed to find someone who does not know at least what Apple is. At a current P/E multiple of 13x, you could argue that Apple is value stock still. Result : Split adjusted return 1,300% before 1.78% dividend over a 10 year horizon. Takeaway : If the quality and desirability of a new technology is apparent in the eyes of a grandmother in her 70s, it’s possible that it’s something special. On a higher level, sometimes jumping on the bandwagon, with a long-term horizon in mind, is not necessarily a bad thing. However, it is important to remain diligent and continually research the performance of the business, the products it is offering, and the desirability of its largest cash producing offerings. The One That Got Away: Facebook (NASDAQ: FB ) What Happened? I mention Facebook because my grandma wanted to buy Facebook from the very beginning, and to this day she is angry that she did not. She was convinced (as many were) that the valuation when Facebook IPO’d was too high, so she chose not to buy in. However, Facebook (even at it’s initially high price @ 38.23 in 2012) has seen a 166.73% price appreciation as of today. Tips for Investing Like Grandma Don’t get too caught up in the noise (CNBC, Fox Business, family), instead remain patient and maintain realistic expectations Don’t be afraid to take a long-horizon approach to investing Focus on companies you understand (and like!) Do your due diligence and spend time getting personally invested in the products and services your company offers Conclusion That’s it! The grandma approach to investing takes patience and personal devotion. Just like you would put time into spouses and family members, get invested in the culture and products of the company you own. Forget the “analyst opinions” and the “most recent news” and focus on what the company you own does for the world. Don’t trust me? Luckily, numbers don’t lie and I believe even the most veteran money manager can learn a thing or two from “investing with grandma.”