Billionaire Ken Griffin Buffs Up on Buffalo Wild Wings (BWLD): Darden Restaurants, Inc. (DRI), Brinker International, Inc. (EAT)

Page 1 of 2

Buffalo Wild Wings (NASDAQ:BWLD)Billionaire Ken Griffin of Citadel Advisors now owns over 959 thousand

Buffalo Wild Wings (NASDAQ:BWLD)

shares, an increase of over 275% from the 254 thousand they owned at the end of 2012. That’s 5.1% of Buffalo’s outstanding shares. Should we be following Griffin into Buffalo? I think so.
Griffin began trading stock options from his dorm room in 1986, and by his sophomore year he had launched a convertible-bond arbitrage fund. Griffin then founded Citadel Investment Group in 1990 with a mere $4 million of assets of under management. At the end of 2011, Griffin managed one of the largest funds in the world, with over $41 billion of assets under management (check out Griffin’s cheap stock picks).

Why Griffin is buying Buffalo Wild Wings (NASDAQ:BWLD)

Buffalo Wild Wings reported fourth quarter 2012 earnings of $0.89 per share, up 22% year over year, on the back of a 5.8% rise in company operated same store sales, and a 7.4% rise in franchised same store sales. To help drive future performance Buffalo Wild Wings (NASDAQ:BWLD) is undertaking various initiatives, such as menu and restaurant upgrading, and the company also has a multi-year affiliation agreement with the NCAA. Buffalo expects net earnings growth of 25% in 2013, much higher than the 17% growth in 2012. Driving this growth will be restaurant expansion.

Last quarter, Buffalo opened thirty-eight new company-owned restaurants, while shutting down one franchised restaurant. In 2013, the restaurant chain plans to open more than 60 company-owned and 45 franchised restaurants, and also expects to achieve the 1,000 total unit milestone by the end of the year. Long-term plans include opening 1,500 new units in the U.S. over the next five to seven years. As well, it is hard to see the expansion into new markets as a problem, whereas different taste preferences might make diffusion for restaurants, such as Olive Garden and Red Lobster, difficult. Buffalo’s concentration of a diversified menu and beer can appeal to a wide audience.

How the industry stacks up

Brinker International, Inc. (NYSE:EAT) owns and develops the major  restaurants of Chili’s and Maggiano’s Little Italy. Unlike Buffalo Wild Wings (NASDAQ:BWLD), which does not pay a dividend, Brinker pays a 2.27% dividend yield. Chili’s has excelled over the past few years thanks to its “lowest per person average check” claim, which has been influential with cost conscious customers amidst a sluggish economy. Brinker International, Inc. (NYSE:EAT) reported last quarter results that were relatively in line with consensus at earnings of $0.50 per share, but the company has robust plans for the future, hoping to double its earnings by 2015. Expansion beyond U.S. should be a key part of this, as the domestic restaurant market is somewhat saturated, Brinker has already established a strong presence in Mexico and the Middle East and hopes to open 420 more Chili’s restaurants globally by 2015.

Texas Roadhouse Inc (NASDAQ:TXRH) , like the other major restaurant  operators, pays a modest dividend, yielding 2.48%. Texas Roadhouse is centered around a single chain, but it is growing. The company posted sales for the first two months of 2013 that showed sales up 2.2% year over year. On future guidance, the company expects to see positive comp sales for 2012 and open around 28 restaurants, but food inflation is expected to be upwards of 7% for the year, possibly squeezing margins. I don’t necessarily like this company given it is solely dependent on its single steakhouse full-service restaurant.
Darden Restaurants, Inc. (NYSE:DRI) pays the highest dividend yield among the five restaurant stocks listed, one that yields 4.2%. The company owns and operates the major chains of Red Lobster, Olive Garden and Longhorn Steakhouse. Despite its diversified restaurant portfolio, Darden has seen some of the more robust pressure due to the economic slowdown. Darden reported last quarter results that showed under performance at in same store sales at all three top brands and earnings down 37% year over year. The company also trimmed its 2013 guidance, with sales growth for fiscal 2013 expected to be around 8.5%, versus prior expectations of 10.0%. This is the second guidance cut for Darden Restaurants, Inc. (NYSE:DRI) in the last six months. The restaurant has set 2013 comp sales growth at 1%-2%, which is below its long-term guidance range (see how Darden might manufacture a turnaround).
The Cheesecake Factory Incorporated (NASDAQ:CAKE) pays a dividend yielding 1.35%. The restaurant has entered into an agreement to expand to the Middle East, but its previous international expansion plans have come up short, with the company having only opened two units outside of the U.S. so far. However, a number of other restaurants have already expanded beyond the U.S., giving them a competitive advantage. The other headwind for Cheesecake is the seasonality of its business, where 90% of its restaurants are located near shopping centers and malls, making it heavily dependent on shopper traffic. As well, around 20% of the total dining capacity at the restaurants is patio seating, which is vulnerable to severe weather conditions.
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. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

The 15 Most Murderous Countries in the World

10 Largest Colleges in the World: Bigger Isn’t Always Better

Comedians in Cars Getting Coffee: The 6 Comedians Seinfeld Needs to Interview

Easy Money: The 10 Most Successful Investors in the World Today

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!