Taking Stock: Buffalo Wild Wings

Dear Mr. Berko:

I bought 75 shares of Buffalo Wild Wings late last year at $81 after spending $103 on wings and beer at one of its restaurants on a Saturday night.

The stock is now $105, and my wife thinks I should sell the stock and take my profit.

I think the stock is headed higher and would like to buy another 75 shares.

My broker believes that the stock could run to $150 this year.

We decided to email you and have agreed to abide by your advice.

KS, Joliet, Ill.

Dear KS:

Buffalo Wild Wings (BWLD-$105) is the owner, operator and franchisor of nearly 1,000 sports-themed restaurants, distinguished by 50 or more glaring 60-inch TVs, 31 varieties of domestic and imported beers, made-to-order chicken wings enhanced by 18 different signature sauces, and shrieking crowds of mostly white middle-class stupids with room temperature IQs.

Since coming public in 2003 at $17 a share, revenues have compounded at 25 percent annually, to an expected $1.27 billion this year, while earnings growth has compounded at 32 percent, to $3.61 a share.

And a 100-share purchase at $1,700 10 years ago would be 200 shares today, worth more than $20,000. Of the 21 analysts who follow BWLD, 10 of them have a “buy” rating.

Eleven have a “hold,” but they collectively agree that 2014 revenues will exceed $1.55 billion and that earnings will come in close to $4.42 a share.

My gosh, you could have knocked me over with a fender!

Who would have thunk way back in the mid-1980s that chicken wings (which we used to bury in the ground as compost) would evolve into a mega billion-dollar business?

Will chicken feet or rooster combs and beaks be next? BWLD could easily open another 2,000 units and then some.

Certainly, there’s no shortage of meatheads who will spend 10 percent of their weekly family income on a Saturday night getting whoozled with other meatheads, most of whom believe that their primal screams and shouts really influence the outcome of their favorite teams’ performance.

BWLD, kind of a Chuck E. Cheese’s for adults, has only $5 million in debt, just 18.7 million shares outstanding, an excellent management team plus a good balance sheet.

If the Food and Drug Administration doesn’t declare chicken wings a hallucinogen and if New York Mayor Michael Bloomberg doesn’t try to regulate wing consumption, revenues, profits and BWLD’s stock price could continue to move higher.

Same-store sales this year are plus 5 percent. Net profit margins (one of the best tests of good management) continue to improve.

And management’s success in growing revenues and earnings during the financial crisis of the past six years is impressive.

BWLD probably will open 100 new units, averaging 9,000 square feet, this year, 70 percent of which will be franchised.

However, management’s decision to open units in Europe could be a mistake.

The sports culture across the pond is profoundly different from ours.

Europe doesn’t have thousands of Little League teams or high-school students who aspire to become professional athletes. European universities don’t have $100 million sports budgets, spend $55 million on salaries for athletic staffs or waste assets on $250 million football and baseball stadiums and $85 million basketball arenas.

European universities believe spending money on education is more important.

However, BWLD’s impressive management should continue to grow the company, and the stock should continue higher if management sticks to its knitting.

This is an attractive issue for aggressive accounts, traders and option wonks.

It also has been a profitable position for the Fidelity Growth Company Fund, Vanguard Explorer Fund and Franklin Small-Mid Cap Growth Fund, which, at this writing, still own the shares.

In January, BWLD announced a four-year deal with the NCAA to become the “Official Hangout of March Madness.”

Only in America!

Because the results have been impressive, management is looking to extend the deal to all NCAA sports teams, reinforcing the company’s recognition that the sporting element (not the food or beer) is the major draw for its restaurants.

Don’t sell yet, because there may be another six months of good market action for this stock.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.
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