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Think outside the box…Goal setting…We have heard this talk all the time..I heard the first one on a radio station as being an overused term…How about thinking inside the box for once..I would like to hear that expression for once..And in that box on Saturdays during the fall season is a college or pro football game illuminating on the screen (or in the box)..What comes along with that–an infusion of a vast group of friends getting ready to see the game with beer,wine coolers and yes,wings..As an investor if you think football is a great market and has its accessories like wings–then why not buy BWLD–Buffalo Wild Wings..
BWLD reported 2nd quarter earnings higher by expectations by 5 cents at 39 cents a share..It has longer horizons by announcing on June 12,2009 that BWLD plans expansions into Mexico and Canada and other countries within the next 3 years..You got to see if it has pretty much escaped this recession or not..The answer is it has averaged 19% in revenues the past 4 years..It has even launched a Fantasy Football All-Star Blogger League–the company knows their fanatic tendencies packing their restaurants with their laptops ready to challenge online football..IBD early last month has incited investors that the stock is forming a nice cup and handle formation…It fell almost 70% last year during the tortuous tsunami in November 2008 and recaptured nearly all its losses by April 2009..The high of April 28 was furthered with a 31% pullback…The selling completely dried up when the stock hit its 40 week moving average finding support there..The cup’s right side handle started to form..What you want to see in a consolidation is a series of high volume weeks..It did this 3 times.. This is a good sign a base is forming…We have seen an upgrade around 37 and the stock is at 40…
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Now we have one undeniable fact..Check your local BWLD out in the next few Saturdays,Sundays and even Thursdays..Volume there will pick up for the casual diners.. But what I dont call this influx crowd as really casual diners at all, but raw-hide football fanatics..” Joe, you off Saturday..Well,round up the troops for the game..I got the beer covered,everyone pitch in when they get here..Dont eat before the game..We are ordering Wings..” This is a normal scene this time of year..When BWLD reports their next 2 quarters and you see earnings –dont think these group of people wont enhance those earnings..Its usually the # 1 choice of food (wings) eaten when watching football at home or restaurants…There are cheaper evaluations with the likes of MCD’s and Darden Restaurants..However at 26.52 trailing P/E, BWLD’s forward P/E at 19.3 has a PEG at .80 –well below the S&P average of 1.7…DRI has had same store comps for the year of its 3 primary concepts dropped 1.4%..But this negative figure was offset by 38 new Olive Gardens,10 Red Lobsters and 16 Longhorns..This enabled sales to grow 9%..DRI is still not a bad investment either since its trading at a forward P/E of 12..Same stores comps this year for casual dining is negative 5.6%..BWLD’S traditional wings in the last quarter as a percentage of total sales went from 22% to 20%..But their higher margins of boneless wings increased from 16% of total sales in the prior year to 19% this year…DRI quarterly revenue YOY in Q2 was 8.2% while BWLD is still gangbuster going at 32.4%..Think about that difference and projection of 40 % more BWLD’S stores by 2013 as to the higher P/E..DRI can still do a better job at controlling costs since its diverse and can increase prices of their higher demand food products and level down inventory of its lesser ones..Its diversity helps in the way that an investor shouldnt get bogged down with a casual dining and fast food stock like DRI that suddenly becomes unfavorable to the patrons as many people flock to ‘the next best thing’..But BWLD has a growing base and a ‘football face’ to it still..About 600 stores and expects 1,000 by 2013–still a growing company…Cost of labor should be lower than last year in Q3 unless natural gas prices rise substantially…Q2 showed restaurant operating expenses reduced 50 basis points at 15.3% to revenue sales due to lower natural gas expenses..Couple this with people enjoying wings 2-3 days a week through early December should boost BWLD sales..
Jesup and Lamont has a buy rating with target price of 49.. One year estimate of EPS for 2009 is 1.70..This could be an easy 19% gain for investors after the next 2 quarters..Something to think about during a slight nervous market for bulls and bears…
Neither Mike Marsh nor his brother Rob Marsh currently own shares of BWLD,MCD and DRI as of this writing ..Please do your own independent research before you make an investment purchase..See our disclaimer.
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