Since this is my first post to the blog, I thought I would talk about my favorite consumable, namely steaks. It came to my attention through researching that in the past year alone some astute investors took the lead and executed buyouts of two highly regarded steak firms in the U.S. The first was the main stream chain of Outback Steakhouse. A great establishment, delivering consistent results with a better than average piece of beef. And of course the infamous Bloomin Onion. Who can blame the takeover artists on that one. Next in line is Smith and Wollensky. I ate there a year ago at a location in Miami. Over priced fare in my opinion.
So, I'm starting to see more investment interest in restaurants period. I believe the next one on deck will be Ruth's Chris Steakhouse. I don't own shares as of this writing, however, I think they are a prime candidate, pardon the pun. Oh, did I do that by design?
This chain is well done in my opinion (enough already), with great attention to service and a unique offering. They sizzle their steaks with butter, similar to the White Castle burger (even though I never ate at White Castle I know this is a key ingredient they utilize). Back to RUTH. 20x forward eps is a little pricey, but the other steak player is Mortons (MRT) who actually loses money. And frankly I'm not surprised. Food is overpriced and is mediocre. Operating margins at 12% at RUTH's make most restaurant operators blush. Back to the P/E of 20x, not that pricey given management guidance of 18% eps growth in 2007 for a PEG of 1.1x for the coming year.
They only have just over 100 restaurants across the U.S. There is still tons of room to grow, they are just very selective in their expansion plans. They don't grow for the sake of growth. I always favour such disciplined approaches to growing a business. In fact plans are for 6-7 company owned locations in 2007 and 6-8 franchise-owned. This is a measured pace. Ruth's is not looking to be the next SBUX of steak. They take pride in their quality, and a hedge fund or private equity firm is likely to take notice, if they haven't already. MAYNARD CAPITAL PARTNERS LLC owns a nice piece, like 6% of the company. They founder of this fund knows restaurants inside out, and they have been accumulating a position in the past year. I suggest you do the same.
So, I'm starting to see more investment interest in restaurants period. I believe the next one on deck will be Ruth's Chris Steakhouse. I don't own shares as of this writing, however, I think they are a prime candidate, pardon the pun. Oh, did I do that by design?
This chain is well done in my opinion (enough already), with great attention to service and a unique offering. They sizzle their steaks with butter, similar to the White Castle burger (even though I never ate at White Castle I know this is a key ingredient they utilize). Back to RUTH. 20x forward eps is a little pricey, but the other steak player is Mortons (MRT) who actually loses money. And frankly I'm not surprised. Food is overpriced and is mediocre. Operating margins at 12% at RUTH's make most restaurant operators blush. Back to the P/E of 20x, not that pricey given management guidance of 18% eps growth in 2007 for a PEG of 1.1x for the coming year.
They only have just over 100 restaurants across the U.S. There is still tons of room to grow, they are just very selective in their expansion plans. They don't grow for the sake of growth. I always favour such disciplined approaches to growing a business. In fact plans are for 6-7 company owned locations in 2007 and 6-8 franchise-owned. This is a measured pace. Ruth's is not looking to be the next SBUX of steak. They take pride in their quality, and a hedge fund or private equity firm is likely to take notice, if they haven't already. MAYNARD CAPITAL PARTNERS LLC owns a nice piece, like 6% of the company. They founder of this fund knows restaurants inside out, and they have been accumulating a position in the past year. I suggest you do the same.
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