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December 2007

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9

2007 Portfolio Review and Comments

December 31, 2007 – Comments (3)

2007 Portfolio Review and Comments  [more]

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2

Questions to ask when you stock falls

December 29, 2007 – Comments (1)

This 5 questions are exerpted from Jason Zweig's new book, "Your Money & Your Brain":  [more]

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Merill Lynch in advanced talk with Singapore for 5bn Cash Infusion

December 21, 2007 – Comments (0)

Singapore Inc's twin Sovereign Wealth Fund, Temasek and GIC owns about 15% of Standard Chartered Bank, 9% of UBS and now perhaps it is in talks to own a chunk of Merill Lynch. I see this as a first serious salvo to compete with HK for financial services supremacy in the region. HK is currently No.1 for asset management in Singapore (brokerage, hedge funds, mutual funds etc) while Singapore is no.1 for Private Banking.  [more]

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3

How I Invest (Part II)

December 19, 2007 – Comments (0) | RELATED TICKERS: KO

This is my second post on how I invest. You can read part 1 here.   [more]

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4

A quote and a view of the markets

December 18, 2007 – Comments (2)

"A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.   [more]

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2

arrgh... brk resembling a momo stock

December 17, 2007 – Comments (2)

down 5.76% now....on some momo investor's reaction to baron's not so positive article.

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4

Baby-steps Investing

December 15, 2007 – Comments (1)

I consider myself a baby investor, having starting investing only in late 2003. In retrospect, I was really lucky. I dabbled in interesting things that didn't do much to my investing performance (like looking at timing the market based on the Lunar effect, or buying stocks that oscillated between predetermined highs and lows etc).  [more]

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2nd Chance: Earn 6.52% before 31st December

December 13, 2007 – Comments (0)

Yup... the gap narrowed from 9.5% to 6.52% since my last  post on the subject.  [more]

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1

Michael Lewis and Buffett

December 12, 2007 – Comments (1)

Someone asked on the Berkshire Hathaway board whether noted Michael Lewis was a detractor of Buffett. Well, this is an old article quote and a download link.

.....
"This modesty is inconsistent with Buffett's vanity about his reputation as an investment genius. The main threat to this reputation other than his performance, which has lagged the market during the past two years is the strong academic evidence that success in the stock market is no different from success in a coin-flipping contest. The suggestion that he is merely lucky drives Buffett to distraction. He regularly ridicules skeptical professors with a vaguely thuggish if-you're-so-smart-why-am-I-rich routine. (The reason he is rich is simply that random games produce big winners, but pity the business school professor on fifty grand a year who tries to argue with a billionaire.)"
....
"The Temptation of St. Warren" by Michael Lewis,
The New Republic, Feb 17, 1992

http://www.retro.ms11.net/LewisBuffett.pdf   [more]

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Robert Rubin: No dividend cut

December 12, 2007 – Comments (0)

``We said in early November that we weren't going to change'' the dividend, said former U.S. Treasury Secretary Robert Rubin, a board member who chairs Citigroup's executive committee. ``I have no real reason to think there will be a change.''  [more]

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Cheeky Post: Have you EVER tried to do a Technical Analysis on Your CAPS Chart ?

December 11, 2007 – Comments (0)

Well, I am just being cheeky, but I did a TA on my CAPS chart a while ago, and according to stockcharts.com, it is showing a falling wedge, which is supposed to be trend reversal...a very bullish sign. :)    [more]

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7

Extrapolating Dead Ant Riots to the Chinese Stock Market

December 05, 2007 – Comments (1)

For eight years, the Shenyang Yilishen Tianxi company ran a ponxi scheme which went something like this:  [more]

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2

Posting some Restaurant Data

December 05, 2007 – Comments (1)

Hi,

I culled the following data from Morningstar. Some very good questions where raised on growth rates in the last post I made, and I hope to mine the following data to look for patterns:

(a) When the restaurants were similar size to the present BWLD, what were the growth rates, how many years of growth did it sustain before it matured.

(b) Is it possible to grow EPS while revenue is slow growth ?

(c) Can we apply the growth rates below to the spreadsheet from the previous post. What is then a realistic valuation of BWLD ?

If you guys have any insights, please share. I will probably look at it later this evening, and post some data.

raytoei



AppleBee's (APPB** Was acquired in Nov 2007)
Revenue 1997-> 515.8 647.6 669.6 690.2 744.3 826.8 990.1 1,111.6 1,216.7 1,337.9<-2006
Op In 1997-> 71.3 88.6 94.9 107.2 112.4 129.7 153.7 165.3 157.6 130.8<-2006
OpsMargin1997 13.8% 13.7% 14.2% 15.5% 15.1% 15.7% 15.5% 14.9% 13.0% 9.8%<-2006
EPSContOps97-> 0.42 0.49 0.56 0.71 0.77 0.97 1.09 1.33 1.28 1.08<-2006

Darden (DRI)
Revenue 1998-> 3,287.0 3,458.1 3,701.3 4,021.2 4,368.7 4,655.0 5,003.4 5,278.1 5,720.6 5,567.1 <-2007
Op In 1998-> 173.8 235.4 296.3 331.9 399.9 390.4 383.7 471.6 439.4 490.7<-2007
OpsMargins1998->5.3% 6.8% 8.0% 8.3% 9.2% 8.4% 7.7% 8.9% 7.7% 8.8%<-2007
EPSContOps98->0.45 0.66 0.89 1.06 1.30 1.31 1.36 1.78 2.16 2.53<-2007

Brinker Intl (EAT)
Revenue 1998-> 1,574.4 1,870.6 2,159.8 2,473.7 2,887.1 3,285.4 3,707.5 3,912.9 4,151.3 4,376.9<-2007
Ops In 1998-> 116.5 154.2 195.7 231.0 247.5 266.6 251.3 221.3 326.6 344.3<-2007
OpsMargin1998->7.4% 8.2% 9.1% 9.3% 8.6% 8.1% 6.8% 5.7% 7.9% 7.9%<-2007
EPSContOps98-> 0.45 0.56 0.78 0.95 1.01 1.13 1.05 1.15 1.63 1.85<-2007

PF Chang Bistro (PFCB)
Revenue 1998-> 78.0 153.3 234.9 318.8 422.1 559.3 706.9 809.2 937.6 1,054.7 <- TTM
Ops In 1998-> 2.0 10.9 20.1 29.0 38.5 46.0 46.2 61.1 53.2 51.7<-TTM
OpsMargin1998->2.6% 7.1% 8.5% 9.1% 9.1% 8.2% 6.5% 7.6% 5.7% 4.9%<-TTM
EPSContOps98->-0.13 0.27 0.43 0.62 0.81 0.97 0.98 1.40 1.24 1.29<-TTM

Cheese Cake Factory (CAKE)
Revenue 1997-> 208.6 265.2 347.5 438.3 539.1 652.0 773.8 969.2 1,177.6 1,315.3<-2006
Ops In 1997-> 14.2 17.7 30.9 46.1 55.4 70.3 82.7 98.9 129.2 106.8<-2006
OpsMargin1997->6.8% 6.7% 8.9% 10.5% 10.3% 10.8% 10.7% 10.2% 11.0% 8.1%<-2006
EPSContOps97->0.26 0.20 0.31 0.43 0.53 0.64 0.75 0.84 1.09 1.02<-2006

BWLD
Revenue 2003->126.5 171.1 209.7 278.2 321.6<-TTM
Ops In 2003-> 7.1 10.7 13.0 21.5 26.9<-TTM
OpsMargin2003->5.6% 6.2% 6.2% 7.7% 8.4%<-TTM
EPSContOps03->0.28 0.42 0.51 0.93 1.16<-TTM


No. of Outlets/Restaurants:

AppleBee's Mid-1995: 575 outlets / 1998: 1000 restaurant / 2007: 2000 restaurants
Darden Restaurant 2007: 1700 restaurants
Brinker: 2007: 1800 restaurants
PF Chang: 2007: 157 + 126 restaurants & Outlets
Cheesecake Factory: 1997:23 Restaurants, 2007: 136 restaurants
BWLD: ~ 461 units (Nov 2007)
 
Compounded Growth Rate Of restaurant for 10 years:

AppleBee's: Rev: 10% Operating Income: 6.25% EPS (Cont Ops): 9.9%
Darden: Rev: 5.41 Operating Income: 10.93% EPS (Cont Ops): 18.85%
Brinker's Rev:10.76% Operating Income: 11.445% EPS (Cont Ops): 15.18%
PFChang: Rev: 29.54% Operating Income: 38.4% EPS (Cont Ops): 18.97% (9 years from 0.27 to TTM of 1.29)
CheeseCake: Rev: 20.2% Operating Income: 22.35% EPS (Cont Ops): 14.64%
BWLD (5 years CAGR): Rev: 20.51 Operating Income:20.24% EPS (Cont Ops): 22.52%
  [more]

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3

BWLD's Share Price and Implied Growth Rate

December 03, 2007 – Comments (3)

Hi,

I am currently doing some analysis to if I should add to my position in BWLD. I currently have a decent chunk of bwld shares which has rewarded me quite handsomely having bought them during the atlanta store fiasco, avian flu crisis and even as recent as July last year when it bought a small chunk at pre-split price of $31.23.

Currently BWLD is selling for 28.57 per share. At this price, what is the implied growth that investors are putting on BWLD ? Using my Simple-Hubble-telescopic-DCF calculator found here ( http://www.retro.ms11.net/SimpleDCF07v2.xls ), I try to reverse engineer the implied growth back to the price.

1. First, I build the assumptions:

Because BWLD is a small-cap, I would put the Discount Rate to a high 15% for the next 10 years.  

(I use 9%/ 12%/ 15%/ as discount rate for blue chip companies, average companies, and lastly small-caps/tech companies, it isn't perfect but I am comfortable with this three values)

For the long term discount rate, I choose 12% because i expect BWLD to grow up like AppleBee's in the longer term.

I also use long term growth of BWLD at 5%.

So with these assumptions, what is the implied growth rate at the current closing price of $28.57 ?

2. Putting all the values in the the spreadsheet, I get a value of 15% growth for the next 10 years. In other words, at the price of $28.57, investors are only expecting 15% earnings growth from BWLD for the next 10 years.

I believe markets are mostly efficient, but currently, the market is wrong about BWLD. Looking at the published Earnings growth of BWLD since 2003:

  Net Income in Millions: 2003-> 4m  7m  9m  16m  20m <--TTM  


The growth rate is way above 15%, and since BWLD is only half-way through its aim of 1000 restaurants, I do expect the revenue growth to accelerate  though EPS / Cash flow may be lumpy.

Using a more realistic growth level, I expect BWLD to grow 25% for the next 5 years followed by 20% for another 5 years. Plugging this in, I get a valuation of around $50.( i have also added in a $64.91 valuation using Benjamin Graham's formula)

3. So what price would represent a good margin of safety ? Buying $1 with 60 cents would make today's price of $28.57 a good starting point.

raytoei
  [more]

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2

"The Security I like Best" --by Warren Buffett, 1951

December 03, 2007 – Comments (0)

"Of course the investors of today does not profit from yesterday's growth. In GEICO's case, there is reason to believe the major portion of growth lies ahead. Prior to 1950, the company was only licensed in 15 of 50 jurisdictions including D. C. and Hawaii. At the beginning of the year there were less than 3,000 policyholders in New York State. Yet 25% saved on an insurance bill of $125 in New York should look bigger to the prospect than 25% saved on the $50 rate in more sparsely settled regions."  [more]

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3

"Scarcity of Value Investors"

December 02, 2007 – Comments (1)

In Their Own Worlds
"Jean-Marie Eveillard and Marty Whitman go where they please in search of value. "  [more]

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3

Earn 9.5% Returns in 01 Month

December 01, 2007 – Comments (2)

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