Player Avatar TMF1000 (99.71) Submitted: 2/14/2012 11:59:21 AM : Outperform Start Price: $11.48 BJRI Score: +179.02

This one has been a very successful cap entry. I consider it one that has super stock status within my portfolio. It isn't cheap but should promise a few decades of solid steady growth.

They have only 113 restaurants in 13 states and they have grown without using debt. Being able to expand without using debt is a sign of a successful concept and one that is disciplined. They have a history of growing their store base at a slow rate.

This hasn’t stopped their earnings growth. Over the last 3.75 years, they have reported earnings per share growth of 20.3% per year. Sales growth during the same period was up 17.68%.

I like this company because it has a very small store base and is in only 13 states. They have excellent potential for expansion. The Company says 300+, I think that is too conservative. They do seem to prefer mall locations which limits the number of restaurants they can build, but I can sure see them creating standalone restaurants in time.

I expect those store estimates to go up significantly as they continue to build out their store base. They have a low cost menu close to that of Buffalo Wild Wings which should help them when times are tougher. They majority of their restaurants are in states, like California which were hit hard by the recession. We are seeing a rebound as the nation recovers.

The first quarter may be a bit weaker since it will begin on January 4, 2012, instead of December 29th as it did last year, so they don’t have the New Year sales included this time. This could give investors a chance to get in cheaper. I am keeping this in mind because I want to add to my position.

They are a fun place to eat. They regularly add new items to the menu. They recently added hamburgers and their guest tap draft program provides each restaurant with local beers. Kentucky restaurants will carry several different locally brewed beers that are totally different from those served in California, so travelers won’t necessarily be running into the same beers and can try other things.

They recently introduced many food items with less than 575 calories. Perhaps most importantly, BJs is experimenting with a new concept, the BJ’s Grill which will be about half the size of their regular restaurants, so now 1,000 stores starts to look more likely and that may ultimately turn out to be conservative.

I believe BJs could be the BWLD of pizza, though they have televisions, they aren’t a sport bar, but pizza is one of the U.S favorite foods with tens of thousands of pizza restaurants, there is huge amount of growth potential that Bjs can tap as they take market share from competitors. The new BJs Grill will help them do that. They specialize in pizza and it’s a good pizza. I am confident they will take a much larger piece of this market in their existing territories. But they haven’t even taken full advantage of expansion opportunities yet being only in 13 states. So I am looking at a few decades of steady growth.

They aren’t cheap. At a price of $58.07, they have a PE of 54.15. It is one of these stocks that won’t give investors too many places to buy them cheap. It did during the very depths of the Great Recession, but anything short of that and you are lucky if can get even the slightest discount. It is a good one in my opinion to buy and add in stages at better and better value points because it should grow for many years. It won’t grow fast, but steadily and without debt. The new BJ Grill could allow it to grow over 1,000 restaurants.

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Member Avatar buylowersellhigh (63.86) Submitted: 2/14/2012 12:05:19 PM
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can you also post your whole write up on MDP?

Member Avatar buylowersellhigh (63.86) Submitted: 2/14/2012 12:16:08 PM
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Thanks Tom. Would love to see what value points you find BJRI attractive? I have been looking for such a restaurant stock. Love the no debt.

Member Avatar buylowersellhigh (63.86) Submitted: 2/14/2012 12:23:37 PM
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Was curious how you thought of BJRI vs. RRGB/FRS? Granted BJRI is more than just burgers. Have a sense of how much the craft beer leads to foot traffic? Like the price point of the entrees. Any sense of their handle on input costs?


Member Avatar TMF1000 (99.71) Submitted: 2/15/2012 9:50:33 AM
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I wrote my page on the MDP Community Research board. Let me know if you can find it. The entire page wouldn't fit on Caps pitch space. It is hard to find a good value point for BJRI. They don't give many opportunities to get them cheap. The only time was during the recession. It is a company, I think one has to ease into and try to make each purchase at a better value point over time.

A 40 PE is probably the cheapest one might get it without a correction and even then we might need some help from the Dow. The price would have to drop to $39.20. Without some help from the Dow that may not be likely. However, analysts believe they will make $1.10 for fiscal 2011, so a 40 PE would be $44. If we use the estimate for 2012 we get $53.60 or very close to the present price.

I believe even today's price isn't a bad one if you plan on holding for ten years. I believe they will grow for a very long time, since they have successfully expanded into 13 states, I see no reason, they won't do as well as they spread into the rest of the U.S. There is always that chance we will have another recession at some point or in the next bear market the price may go lower. In cases like BJRI, I just buy and add to it over time at better and better value points.

An alternate strategy is just to wait. But I have found that if I don't own some I won't watch close enough to spot the value point when it finally hits. So I tend to ease into my stocks over time at try to keep buying at better value points.

Without a recession, it will be hard to get them at a much lower PE because they are in the very early stages of growth. Normally for growth companies, I like to grab them at PE levels around 30, but I just don't see that happening without a correction. Based on 2012 expected earnings a 30 PE would be a price of $40.20.

Getting this one cheap is very hard to do.

Member Avatar dearnojem (< 20) Submitted: 2/15/2012 7:45:22 PM
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There is one BJ's close to our work and it is always full during lunch time. It is close to the mall. The thing that I noticed is the food court in the mall will be half full at lunch time but at BJ's you have to wait 10-15 minutes to get seated. I will keep monitoring this one for buy in points and trading ranges. Thanks Tom.

Member Avatar buylowersellhigh (63.86) Submitted: 2/16/2012 5:07:27 PM
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Any thoughts on the Quarter? Any key takeaways?


Member Avatar buylowersellhigh (63.86) Submitted: 2/17/2012 11:46:02 AM
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Down about 5% right now. Hopefully, it will keep going down..LOL

Don't see anything that would warrant that. If anything, they concluded that their concept could hold for even more 300 stores, like you had mentioned. I think they are still low-balling with 500+

Member Avatar TMF1000 (99.71) Submitted: 2/19/2012 6:23:00 PM
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Sales and earnings were up great. We don't have a cash flow statement, but cash levels are higher than the third quarter. Of course when PE are high, even a good report can send the price down and I believe that is what and will continue to happen until earnings finally get up to the point where the PE is in OK territory.

Over the next few years, the PE will come down or the price will go higher, either way long-term investors will be holding quality shares. I placed a note to try to snag some at $47.64, the PE then will be 44, still high, but investors aren't going to get too much of a chance to buy them cheap without a big drop in the market.

Similar story with Chipotle. From the very time it was spun off by McDonalds, the PE just keeps expanding. During the Great Recession, in November of 2008, the Company could have been purchased for a PE of 15.49. And there hasn't been a similar chance since. BJRI low point was also in November 2008, the low PE was 14.73. What a nice time to buy stocks. Without another big recession, we are going to have to settle for my higher valuations. I would be happy to add some at a PE of 44 now. And even that valuation may not happen.

I don't think the price will just stagnate. But if the price remained $47.64 until the end of fiscal 2012, the PE would drop to 29.05. What I believe will happen barring another recession and a crashing market, is the price will go up about the rate of earnings growth. So not to be invested could keep people from grabbing that money that comes when a high PE stock remains high while the price grows with earnings growth. The little pullbacks may be all we can hope to get for now. This is why I ease into my stocks little by little over time. I try to get better valuations, but sometimes I just have to settle for buying a greater margins of safety that develops on previous purchases when the price of the stock just keeps going up with earnings.

For instance, I placed BJRI on caps at $11.48 on December of 2008. Today earnings are $1.08, so the PE on that orginal investment is 10.63, so even if we had a crash similar to the November 2008 lows my principal would be safe and that took only about three and half years. As earnings go up, over time, even at today's prices the PE will go down on our present purchases making it harder for the volatility of the market to hurt us. Each quarter my original purchase becomes safer and safer. So I ease into my stocks sometimes at worse value points, but when I do that, I do it slowly and over time, so that growing earnings help protect my previous investments. I want to add to my winners and sometimes that means adding when valuations aren't as good. These little dips help me do that with bit more safety.

February 16, 2012 4Q:2012 Notes:
** 4Q revenues were $171.769 million up from $132.896 million
** Fiscal 2011 Revenues were $620.943 million up from $513.86 million
** TTM revenues were $620.943 million or
** Diluted share count 29.274 million
** Earnings were $0.34 up from $0.24
** Fiscal 2011 $1.08 up from $0.82
** Same store sales were up 5.1% : 115 stores in 13 states
** Cash and investments $53.135 million: debt 0
** Trading range between February 16, 2012 and the present was $50.96 = PE ratio 47.18
NOte to me: Try to snag at $47.64

Member Avatar buylowersellhigh (63.86) Submitted: 3/6/2012 3:23:30 PM
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Have you looked at ARCO? They are the largest McDonald's franchisee in South America.


Member Avatar buylowersellhigh (63.86) Submitted: 4/30/2012 2:54:29 PM
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What do you think of earnings? Price has come down to $43.03. Better value point.


Member Avatar Ripper14 (< 20) Submitted: 6/28/2012 3:23:36 PM
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Tom, with the help from the DOW, BJRI is now down to PE 32 (TTM) and forward PE 28. It looks like a good value at this point. But here is my question: What makes BJRI a good investment from a pizza/beer restaurant standpoint? BWLD has a niche, PNRA has a niche, CMG has a niche. All are fairly unique in their menu and atmoshpere, and that is what I think makes them a compelling investment. They offer something that isn't easily copied. However, pizza restaurants are a dime a dozen. How can/does BJs separate themselves in this space and offer a reason to go there vs the ubiquitous (sp?) locally owned pizza shop that every town has, not to metion Pizza Hut, etc. I live in AK, so I certainly can't go and visit a BJs (although I will try if I ever travel near one), which is why I am asking you, who have been there. What is BJs "special sauce"? Why would I want to eat there vs other pizza joints?

I'd like to invest in this company. I like all the positives you and others have said about them. I am just uncertain what will drive traffic as they expand.

One further question, are there other national pizza chains in the same vicinity of a BJs, and how well do they compete with them?

Thanks for your time and insight!


Member Avatar TMF1000 (99.71) Submitted: 7/6/2012 11:27:20 AM
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Hi ripper,

They make a good pizza, but that isn't their draw. They are a microbrewer who has a nice selection of beers their company makes. However, they also carry other microbrew, attempting to bring the most popular local regional beers to their stores along with some national favorites. They regularly add new ones and subtract, so customers can often try new things. They are also more upscale than say a BWLD. They carry wines a selection of bourbons and scotch and serve ahi tuna. They make a good hamburger and good slideres too. They also offer many light under 521 calorie dinners which is nice for those watching their weight.

They have a very small store base, so they could grow for a very long time. Pizza is one of the more popular foods in the U.S and though there are many competitors, their pizza is very good and competes well. But their main draw is their microbrewed beer selection and other microbrews.

Member Avatar TMF1000 (99.71) Submitted: 7/6/2012 11:28:31 AM
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I did buy more recently, so I like the value point. Its always going to be expensive unless we have another big recession. I just try to buy at better and better value points over time. And let growing earnings increase the value of each position over time.

Member Avatar conifer (< 20) Submitted: 7/6/2012 3:47:48 PM
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Hi Tom,

Is the price drop since February due to anything in the reporting, or just a generic move downward ? Have you seen anything to explain it ?


Member Avatar TMF1000 (99.71) Submitted: 7/9/2012 7:19:36 AM
Recs: 3

Hi conifer,

I think it is down because of the PE ratio which is still high. But it has always traded at a premium. The last report was very good for them, I believe the next one will be good too. But when the PE is over 30, volatility is going to be higher. That is true for most stocks. They still have a very small store base. I just bought more at $38 and change and I will keep adding to it at better value points. I have been more aggressive buying them. I would love to get a much better value point, but they seldom sell cheap. So I buy and wait for the margin of safety to kick in as earnings go up.

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