Rick's Cabaret Int'l, Inc. (RICK)

The share price has plummeted on this stock since I added it to CAPS, and I decided to defend my position. From what I can tell- anyone that gets in under $5/ share is getting in on a great opportunity. I observed RICK'S for a while on CAPS before I jumped in. I bought shares under $4- and made some profitable short term plays out of the trading range that I observed. I made a rule of buying the stock only as it went down, making a profit I was satisfied with on an upswing- and jumping out. I am a long term investor- and I generally do not assume short term risk- but I saw what I perceived as some rare opportunities to trade RICK and I took them. My problem was that I was scared of losing the gains- and I jumped ship, before the most recent market rally would have generated the greatest profit.

Rick's does not seem to have much stock market competition at the moment. RICK and its competitor VCG Holdings (VCGH) are both considered undervalued. Rick's seems to offer the greatest value for shareholders, as it offered a nice surge over $5/share during the last rally. It had been trading below $4 for a while- so a surge like that was nice to see. VCGH seems to be struggling to rebound. During the rally when Rick surged, VCGH fell. VCGH recently has been struggling for support over $2/share and seems stuck in the mid 1.50 to 2.00 range.

Some analysts are betting on a deeper and prolonged recession. I am not excited about jumping in again until I notice a repeat trend or trading pattern. RICK, now in the $4 range, has fallen in the last few regular trading sessions, but tends to regain some of what it lost in after-hours trading.

One detail worth mentioning about RICK is the executive compensation. CEO Eric Langan made a base salary of 400,000/yr in 2007, according to a Forbes profile. I do not know if his base salary changed for this year. VCGH CEO Troy Lowrie announced Dec 10 that he would draw a base salary of 700,000/yr, according to the Triangle Business Journal of Denver, CO. It is Lowrie's first time drawing a salary and it is hard to be critical of that. Still, if I were a shareholder, I would be upset in the performance of my shares as the announcement is made. RICK currently seems to be delivering more to shareholders.

I shorted at $26 but now this seems like a buy point at $13

On my real life buy list when I see a true bottom.

this is so cheap...

Being the thorough investor that I am, I made sure to do my due diligence by visiting establishments and spending quality time with the firm's employees. My conclusion... this is a business model that I can really get my hands on.

Men will be men, forever.

good acquisition plan, good leader

hot babes.. as they say, pick what you would want to own yourself! :)

Creating a portfolio based on calling outperform on every alcohol, tobacco, pornography and gambling stock I can find.

Founded in 1983, Rick's Cabaret (NASDAQ: RICK) is a major owner and operator of high-end strip clubs in the United States. The company currently owns 15 strip clubs in 5 states under 3 brand names. Rick's also has franchisees in Latin America (Buenos Aires) and New Orleans. In addition, Rick's operates two adult-oriented websites; an adult auction site (naughtybids.com) and a swinger's hook-up site (couplestouch.com). The company is small-cap growth; earnings were up 405% in Q1 2008 compared to Q1 2007. Current market cap is $170 million.

The company is following an aggressive growth by acquisition strategy; the goal is to have 30-50 Rick's locations nationwide in the next three to five years. To this end, Rick's has been purchasing and rebranding "fix-em-up" mom-and-pop strip clubs at PEs of about 3-5. The company is now purchasing and looking to purchase already profitable strip joints with at least $10 million in revenue at around 4 times EDITDA, although it will accept smaller clubs or more expensive clubs if it helps build brand recognition. The company has three-letters of intent signed, with an acquisition in Philadelphia a definite go. The credit crisis has not changed their acquisition plans; debt to equity is about 0.5.

The long-term goal of Rick's is to consolidate the strip club industry under a recognizable brand name. So far, no one has tried to consolidate the industry. The CEO believes the first to do so will be the victor; Rick's wants to be to strip clubs what Ruth's Chris is to steak houses, Starbucks is to coffee, and Coke is to coke. Insiders own more than 40%.

Naked dancers and earnings GROWTH, what's not to like.

This is a tough call because there is a lot to like, and a lot that gives me pause.

The main profit engine is quite simple. They buy strip clubs at a P/E of about 6, and their stock trades at about 20. That's a great arbitrage game. I don't think it will stop unless other major chains emerge to bid up prices for local properties, and there are no signs of that on the horizon.

The other great thing is that the company does seem to excel at operations. Their same store sales rise briskly; since they've owned most stores for only a short time, same store sales are an indication of its ability to get more profits out of the properties it buys.

Finally, I am sensing that this is a market that is yearning (forgive the pun) for a brand name. It worked for Hooters. Consistency of experience and a reputation for "high class" is likely a big plus with clients, especially business travelers.

However, there are a couple of warning signs. First, the company took out debt to buy a jet. This smells less like a smart investment than a management perk. Second, its cost of debt is very high. As of last fall, they were paying 14% on new debt; recently that has fallen to 9%. They're paying 6.15% on debt secured by the jet plane. In other words, lenders are not fully confident here.

Finally, the company has a lot of outstanding put options. Each time they use equity to buy out a club, they are giving the sellers put options at between $20 and $25 a share. This could create massive liquidity crunch in the event the share price falls.

I think I'm going to call long, but this one carries risk.

Strip clubs come and go in my neck of the woods, so how can you consistently make money in this business?

This company meets all of Peter Lynch's criteria for a great stock: it has very high growth of sales, earnings, and positive cash flow, especially compared to its P/E. It has large insider ownership. The business is relatively recession-proof. It has gotten past the start-up stage, showing that it can successfully acquire new locations and integrate them profitably. Acquisitions are usually immediately accretive, and are often bought at least partly with equity. Yet mgt. recognizes that they should not buy with equity at times when the market is pricing the stock too low, so the don't dilute existing shareholders. It owns about 18 clubs, but there are thousands of clubs that are potential acquisitions, so there's huge room for growth, not to mention growing outside the US. Finally, it's a business in a disreputable industry, like Lynch's Service Corp. Int'l example from "One Up on Wall Street." The fact that a company with numbers like these has a CAPS rating of less than 5 proves the point.

The only thing it's missing is a nondescript name.

There is not a major index this stock has not outperformed in the last 5 years. During that time frame, it is up about 1500%. Revenue and earnings growth rates are sizzling. Rick's has a solid acquisition plan in place that is immediately accretive to earnings. Rick's has no competition in the public markets. Major shareholders who are not executives or directors are completely supportive and in tune with management's long term strategy. Jeff Feinberg's hedge fund has a 10% plus position in the company. He used to be the number two guy at Fidelity Magellan. He is also a Harvard Business School grad. Sex sells and so-called sin stocks have historically performed well. As a roll-up company, Rick's strategy is fairly simple and straightforward to execute. Rick's is profitable and the margins continue to increase. From strictly a financial standpoint, this company is outstanding. Strip clubs are much more accepted by the mainstream than maybe they were by previous generations. And who says they aren't accepted? My 73 year old father has a position in Rick's. All the upscale clubs maintain the exterior of their buildings and the landscaping surrounding it in a manner that exceeds the highest expectations. It will be interesting to see if potential investors who shun this stock based upon morality give in to greed and buy it if the stock continues to perform so well. Ricks is getting big enough for S&P to have to consider it for inclusion in the S&P 600 Small Cap Index. Additionally, Rick's is almost big enough for the CBOE. It sure would be nice to see Fortune Magazine or The Wall Street Journal give Rick's Cabaret and CEO Eric Langan some mainstream press coverage on a national level. Based on financial performance, the company has earned it.

This company is setting up to develop in many other areas. They are now being endorsed by "Ronnie the Limo Driver" from The Howard Stern Show. I expect continued earnings over the next several years.

Boys will be boys and during the worst economic times they look for temporary relief

Nightclubs will still generate lots of revenue, despite economic downturn

As long as Rick keeps the supply of booze flowing and pretty girls dancing, then the guys (and some gals) will keep the doors open. Sin is in and sex sells, always have and always will.

recovering momentum should be back on track after incredible quarter.