Buffalo Wild Wings (BWLD)
By Timothy Lutts, Chief Analyst, Cabot Stock of the Month
From Cabot Wealth Advisory 7/7/14 Sign up for Cabot Wealth Advisory—it's free!
One of the simplest and most powerful business concepts is that of the cookie-cutter.
Applying mainly to retail businesses, it involves honing a successful formula and then opening up new stores again and again using the some successful formula.
The king of the cookie-cutter business is McDonald’s (MCD).
If you had invested $1,000 in MCD at the start of 1980, you’d have $93,457 now.
Other successful cookie-cutter fast food companies include:
YUM Brands (YUM), parent of Pizza Hut, Taco Bell and KFC.
Starbucks (SBUX) and Dunkin’ Brands (DNKN)—and I’m sure you can name others.
Today, Buffalo Wild Wings (WWLD) is on track to be another great long-term success story for three simple reasons: chicken wings, beer and sports on TV.
From its origins in Ohio (by a guy from Buffalo, New York and his friend), the chain has grown to more than 1,010 restaurants across all 50 states as well as Canada and Mexico.
Revenues have grown every year of the past decade (even through the tough times of 2008-2009) and earnings have done the same. For 2014, analysts are expecting earnings growth of 34% and for 2015, 18%.
And now the company is working to diversify!
The new restaurant model is called PizzaRev (short for Revolution). It’s a fast-casual interactive dining experience where customers choose their toppings for an artisanal pizza that is cooked in an open-flame stone-bed oven and ready in just three minutes.
The model was honed in California, and it’s now being rolled out in Minnesota.
Whether PizzaRev succeeds as well as the original concept or not, growth for the company is almost guaranteed.
Good management ensures that after-tax profit margins run between 5% and 8%.
And now is a pretty good time to get on board.
The long-term chart of BWLD is trending upward, which makes sense for a company that’s persistently growing both revenues and earnings. But as with any stock, there are fluctuations, and it’s best if you can buy at a low-risk entry point.
Happily, BWLD has just completed an eight-month basing phase, which means downside is limited and the upside holds great potential.
Back in early May, when this series of 10 stocks started, BWLD was trading at 140, in the low end of its range. In late June, as the market rallied, the stock broke out above resistance at 160. And now it’s sitting right there. If it succeeds at holding up here, that old resistance at 160 will turn into a base.
So, if you like the story, you could jump in now, thinking that support at 160 will hold. If it doesn’t hold—particularly if the broad market heads into another correction—you could see 150 or even 140.
But an even better choice today would be to take a no-risk subscription to Cabot Top Ten Trader, which is where Mike Cintolo originally recommended BWLD. That way, you’d get Mike’s very latest picks, as well as weekly updates, so you’re never left guessing about what to do with your stocks. Click here for more information.
Today I'll highlight a stock I've been keen on for a while, yet the stock (and its group) just never got going last year. But now, it looks like the tide may be turning.
I'm talking about restaurant stocks, but specifically, "new idea" restaurant stocks that aren't already so big that they're destined to grow a measly 5% a year. One of my favorite ideas in the group, Buffalo Wild Wings' (BWLD), has tons of expansion potential in the years ahead, which, combined with growth at restaurants already open, should drive earnings sharply higher.
Buffalo Wild Wings' is aiming to be a national sports bar of sorts, a novel idea. The firm makes a lot of its money on alcohol, thanks to its fun, cozy atmosphere, yummy wings (including a dozen different sauces) and crew that is told not to force customers out the door. The firm currently has 652 stores in 42 states, but management believes 1,000 stores in the U.S. is easily achievable, followed by expansion overseas. Revenue growth is running in the 25%-plus range, with earnings a little faster.
The stock has been building a base since the middle of last year but perked up in 2010 despite the soggy market. Also, the company reports earnings on February 11. Assuming the stock get through the earnings reports unscathed, my thought is that it has strong upside in the months ahead as money flows into the fastest-growing companies in this group.
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Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Weekly
A growth stock and market timing expert, Michael Cintolo is editor of Cabot Market Letter and Cabot Top Ten Weekly. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides that has helped Cabot place among the top handful of market-timing newsletters numerous times.
|Buffalo Wild Wings (BWLD)
5500 Wayzata Boulevard, Suite 1600
Minneapolis, Minnesota 55416
|Index Membership: S&P 600 SmallCap, S&P 1500 Super Comp |
Full Time Employees: 1,200
2/4/10 Buffalo Wild Wings (BWLD): Expansion potential in the years ahead