Monday, April 30, 2007
At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of ISL --- although positions can change at any time.
Tuesday, April 24, 2007
This week we get a slew of earnings from the casual dining sector with stocks such as Brinker International (EAT), Cheesecake Factory (CAKE), IHOP (IHP), Panera Bread (PNRA), Wendy’s (WEN), Burger King (BK), PF Chang’s Bistro (PFCB), Rare Hospitality (RARE), Famous Dave’s (DAVE), BJ’s Restaurants (BJRI) and Burger King (BK) all set to report. There are certain to be winners and losers amongst them. However, there are some themes worth noting before the multi-course earnings meals are delivered:
- The casual dining segment has been hurt by the weather and declining traffic as evidenced by low positive or negative same store comp sales.
- The substitution effect is kicking into high gear again as energy prices push diners down from the casual dining segment into the quick casual segment. McDonald’s (MCD) which reported last week and WEN and BK which report this week should benefit.
- Chicken prices rose last quarter while beef prices were flat to slightly up or down depending on how purchasing and hedging strategies were executed by the chains. The creeping effect of increasing state minimum wages are beginning to take hold in the casual dining restaurant chains which derive all or most of their earnings in the
- As with specialty retail, the high end specialty restaurants continue to grow and attract diners despite menu price increases which are being passed on to diners.
So what do you do? It’s time to get back to a barbell approach to investing in this sector. The strategy is to own a quick service and high end restaurant in the portfolio. My picks are MCD and Ruth’s Chris Steakhouse (RUTH). The only exceptions in the middle would be casual dining outliers like Benihana (BNHN) which are exhibiting strong traffic, comps and growth. BNHN might be worth a look on a dip if the stock sells off in sympathy with the rest of the sector.
At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of MCD, and RUTH --- although positions can change at any time.
Friday, April 20, 2007
Seton Hall University Wins the NYSSA (New York Society of Security Analysts) Investment Research Challenge Once Again
Please join me in congratulating the team of students from the Stillman School of Business at Seton Hall University (SHU) - where I am on the faculty in the Department of Finance – that was victorious in the 2007 NYSSA (New York Society of Security Analysts) Investment Research Challenge. SHU has now won this prestigious competition two years in a row. The team of Andrey Botev, Megan Joseph, Theresa Ko, Bill Moore, and Angelo Stracquatanio was led by faculty advisor Dr. Andrew Yi. I have had the pleasure of teaching both Angelo and Andrey at in my classes at SHU. The SHU team recommended that investors sell shares of Tasty Baking Company (TSTY). I had the opportunity to advise the team and observe their presentation which was of professional quality. Next up for the team will be the ringing of the NASDAQ opening bell on Monday, April 23 and competing against Babson College, Chinese University of Hong Kong, and Rice University at the first ever CFA Institute Global Investment Research Challenge next Thursday, April 26th.
The best kept secret in the NYC metro area is the quality of the students and program at
Thursday, April 19, 2007
My wife and I have been busy getting ready for our son’s Bar Mitzvah (the fourth of our five children) which will take place in June. We allow each child to buy a new computer with their monetary gifts and the rest I will invest in a portfolio of five of my favorite stocks as part of their college custody account. These five stocks are also amongst the top holdings for the client accounts at LakeView Asset Management, LLC and me personally. What follows is what I affectionately call the Bar Mitzvah Portfolio:
- Apple (AAPL) – AAPL is not just an iPod company. AAPL iTunes is the largest site for digital downloads. The company is growing its core Macintosh desktop computer sales as more users continue to migrate away from the Microsoft (MSFT) Windows operating system platform. MSFT
Vistaoperating system is such a disaster that it turns out to be the best marketing tool for the Apple Mac. For his Bar Mitzvah computer purchase my son and I went shopping for a Mac this week at the Apple store in the Short Hills Mall. We picked out a model as we now plan to take that first big step away from Windows. AAPL is making a move into home entertainment with Apple TV. Next to launch is the greatly anticipated iPhone. My guess, and this is only a guess, is that AAPL will develop its own video game system with digital download capability to compete against the Xbox and take more business away from MSFT
- Google (GOOG) – Google is set to report earnings today after the market closes and I expect the company to far exceed analyst expectations for EPS of $3.30 cents. This should come as no surprise especially as we know how strong the company’s business model is performing and how poorly Yahoo (YHOO) is executing after that company reported a disappointing quarter earlier this week. The best way to look at this relationship is in SAT terms. GOOG:YHOO as AAPL:MSFT. GOOG continues to expand its reach into advertising, the internet, and the digital media. Just last week GOOG announced that it would acquire DoubleClick and entered into a radio advertising arrangement with Clear Channel Communications (CCU). Expect this company under its very astute management team to continue to innovate and grow. A price of $600 in the next year for GOOG is not out of the question.
- McDonald’s (MCD) – I have held this stock for several years. Despite the unexpected passing of two CEOs in a short period of time, the company continues to be the best managed restaurant chain in the world. You can credit: the deep pool of management talent; innovative menu changes; increased operating hours; turnarounds in Europe and
Japan; and, expansion in for MCD continued success. Just last week MCD surprised analysts and investors by guiding to significantly higher than expected 1q07 EPS and sales. On top of all this, MCD has a dividend yield of 2% which should get a boost later this year on top of a healthy stock buy back plan. China
- Goldman Sachs (GS) – Oldie Goldie is the investment banker to the world. When it comes to investment banking, mergers & acquisitions, investment advisory, and sales & trading GS is the New York Yankees, Los Angeles Lakers, Montreal Canadians and Green Bay Packers all rolled up into one. It’s a proven winner. GS attracts the best talent, has the best stable of clientele, is well connected politically (in the
and abroad) and should attract your investment dollars. US
- Sears Holdings (SHLD) – I came upon SHLD many years ago when it was still Kmart not long after Eddie Lampert took it out of bankruptcy while I was doing my research into Martha Stewart Living Omnimedia (MSO) during the several months leading up to Ms Stewart's trial. I had correctly positioned our portfolios short MSO for a guilty verdict but also bought Kmart in the process. A few months later Lampert and Kmart gobbled up Sears turning the combined company into SHLD. I highlighted SHLD as one of the most compelling investments in a LakeView Asset Management blog entry last month. Recently Lampert put a plan into motion to harvest some benefits from its
Kenmore, Craftsman and DieHard brands by securitizing those intellectual properties as part of a complex structured transaction. Expect Lampert to make some savvy acquisitions in the future. When people ask me if Lampert is the next Warren Buffet I always answer “No. He’s the first Eddie Lampert.”
At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AAPL, GOOG, MCD, GS and SHLD -- although positions can change at any time.
Tuesday, April 17, 2007
Some of you have contacted me over the last 24 hours or so, remembering my proximity to Virginia Tech – my town of Roanoke, Virginia and Blacksburg, Virginia being just about 35 miles apart. Folks were kind enough to ask if I had any family at Tech.
I appreciate the concern. No, my two older kids are out of school now and my youngest is still in high school. So we are all well - as well as any of us who live in this area can be that is. Roanoke and Blacksburg are closely intertwined, with Virginia Tech being the major university in the area and the alma mater of many people here. More important, there are many young people from Roanoke who are Tech students. So while the whole nation was horrified by what was taking place, here in Roanoke it was very personal – since virtually everybody knows someone there.
Yesterday as the news started hitting I called several parents here to see if they had heard from their children. With each call I felt better, as folks told me that they had spoken with their kids and that they were safe.
Then I called my friend Mike, since I knew that his son was an engineering student – a senior – at Tech. He said, “No, I haven’t reached Brian yet. He didn’t pick up his cell phone, but that’s not unusual. I’m sure he’s ok though.” Of course he wasn’t sure. He wasn’t at all sure, and we both knew that.
We watched and read the news together over the phone as more and more details came out. He noted that the first shootings took place in Ambler Johnston Hall and mentioned that he knew where that was – he himself having gone to Virginia Tech back when we were young, back before young people routinely killed each other in random mass attacks. I asked where Brian would likely be and Mike said “Most of the time in Norris Hall. That’s a long way from Ambler Johnston.”
Then, within just a minute or so we both read that it wasn’t just confined to the two shootings at Ambler Johnston. Soon, the words “Norris Hall” and “engineering” started popping up with frequency as the details began to emerge.
Mike got quiet, as did I. Then he said, “I guess I’d better go and try to reach him some more.” He promised to call me as soon as he heard anything.
I only felt a fraction of his fear. A smidgen of his panic. I only got a glimmer, a glimpse of what Mike and many other parents were experiencing yesterday. And it terrified me nonetheless.
Any parent who has ever worried about a child driving home and being later than he should, or watched as she almost toddled into traffic, or felt helpless as he was wheeled away to the operating room, can imagine what Mike and others were enduring yesterday.
I wanted to call somebody. I wanted to watch the news. I knew I should get some work done. But I left the office and walked the two blocks to my home. What I actually wanted was to see my son.
I remembered that he was at home, studying for an afternoon test at the community college where he also takes courses, and it seemed important for me to talk to him. But he wasn’t at the house after all, having decided to study at the college. Now I knew that his school wasn’t Virginia Tech and I knew that he was ok, but I still felt compelled to reach him. I made up an excuse and called him to talk about something that could have easily waited until later – knowing that if I told him that I really just wanted to hold him and hug him and hide him, he’d think the old man had gone nuts.
On my way back to work I stopped in to two little family stores in this quiet neighborhood of ours – Lipes Pharmacy to pick up a prescription and Tinnell’s Grocery for a Diet Coke. While I was in the grocery my cell phone rang and it was my office. My heart froze when they told me that Mike had called and left word for me. He had news of his son.
Brian was fine.
And his dad was fine. And my son was fine. And all’s right with the world.
Well, no. Not really.
Our quiet little neighborhood somehow didn’t seem so quiet, and Tinnell’s and Lipes didn’t feel like Mayberry anymore. Blacksburg and Roanoke are just a half an hour apart, and Blacksburg and Roanoke are forever changed.
I know I’ll never pass a Luby’s restaurant again without being reminded of Killeen, Texas. And now, let’s do a quick word association. I say “Columbine.” Do you say “pretty little purple flower” or does your mind immediately flash to the senseless and evil violence at that school?
Oh, and someone reading this is certain to question my use of the word “evil.” Let me be clear:
E-V-I-L. Or perhaps “wicked” makes my point more plainly to you. Please, please spare me the diatribes about poor little bullied and socially disenfranchised young people acting out in the only way they know how. Evil, wicked, senseless, cowardly, hurtful, despicable, and once again evil I say.
And now, Virginia Tech and Blacksburg will always be known, not as a fine school and a nice town, but instead as the place where evil once again robbed life and hope and promise. 32 people were lost, and another 22,000 or so young people lost their youth, as something wicked their way came.
And here in Roanoke, I’m not sure that things will ever be exactly the same either. You see, even if you don’t know somebody who was hurt or killed, or know their families, this is a small enough community and the degrees of separation close enough that inevitably you will know someone who knows someone who was impacted.
Classes will resume, and life will go on, and kids will learn and study and graduate. People and towns and even schools have remarkable resilience. But let’s not think for even a moment that things haven’t changed.
I’m kind of afraid that people watched the news for a moment yesterday and thought “Oh, another school shooting - what a shame” and then switched to the sports channel or MTV.
We get used to evil and violence and it doesn’t shock us the way it once did. We get hardened to it, and accustomed to it and inured to it, and we come to accept it as routine. And that’s a change that bodes poorly for us all.
“Mother, mother, there's too many of you crying
Brother, brother, brother, there's far too many of you dying
You know we've got to find a way
To bring some lovin' here today …”
Marvin Gaye – “What’s Goin’ On?”
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Saturday, April 07, 2007
I took my two younger sons, aged 10 and 13 years to see Disney's (DIS) Meet the Robinsons on Saturday evening along with a neighbor and his young boys, aged 6 and 10 years. The audience was rather small but the children in attendance enjoyed the movie. In my opinion, this movie was so bad that I could not wait to leave. The father of the other boys fell asleep during the movie only to wake up for the final 15 minutes which was the best part of the flick. I would describe Meet the Robinsons was as a convoluted computer animated version of Back To The Future. After a string of highly successful and I might add enjoyable computer animated movies such as Cars, Finding Nemo, The Incredibles and both entries in the Toy Story series, DIS has finally delivered a real stinker. The opening box office weekend was disappointing and I expect the second weekend to be no better. DIS expected to have Meet the Robinsons pump up holiday DVD sales but I would expect analysts to have to lower their revenue estimates. Next up for DIS is Ratatouille which based on the previews should be a step up and more in line with the computer animated releases of the past. Ratatouille may have to be rushed to the shelves for holiday sales to make up for the shortfall I expect from Meet the Robinsons.