A Board Member Thinks Yum Isn’t That Bad

Page 1 of 2

Robert Walter, a member of Yum! Brands, Inc. (NYSE:YUM)’s Board of Directors, bought 35,000 shares of the stock on February 6th at an average price of $61.95 per share. This purchase came shortly after a disappointing report from the restaurant company, whose three core brands are Pizza Hut, KFC, and Taco Bell. While last quarter was not particularly bad- net income was down 5% from its levels a year earlier and a small increase in revenue- Yum expects to report a decline in earnings this year as the Chinese business underperforms. The company claims that this is due to supply issues which would be resolved within a year, putting Yum back on track, but the stock has seen a number of downgrades including from Goldman Sachs.

The insider purchase- and a substantial one at that- shows that at least one insider is very confident in Yum’s prospects. Insiders should hesitate before buying shares, since it reduces their diversification, unless they think that the potential gains are high enough and certain enough to overwhelm the benefits of diversifying their wealth. Studies show that stocks bought by insiders tend to narrowly outperform the market (learn more about studies on insider trading).

Steven Cohen

With its iffy fourth quarter in the books, Yum! Brands, Inc. trades at 19 times trailing earnings. That shows that even after the decline in the stock price, the market is expecting high growth rates over time as Yum capitalizes on its decision several years ago to focus on the Chinese market and other developing countries. Analyst consensus for 2014- after the company expects its business to be back on track- implies a forward P/E of 17. We’d say that this is a very bullish outlook, and certainly wouldn’t consider Yum a value stock at these levels. It might be best to wait out a few quarters and see how its recovery progresses.

While hedge funds and other notable investors were pulling out of Yum! Brands, Inc. during the third quarter of 2012, it still made our list of the most popular restaurant stocks among hedge funds (see the full top ten list). Billionaire Steve Cohen’s SAC Capital Advisors increased its stake by 55% during the quarter and closed September with 1.5 million shares in its portfolio (check out Cohen’s stock picks). Chilton Investment Company, which is managed by fellow billionaire Richard Chilton, cut its stake slightly but still reported a position of about 640,000 shares (find Chilton’s favorite stocks).

How does Yum compare to its peers?

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!