A 13G filed with the SEC has disclosed that SAC Capital Advisors, managed by billionaire Steve Cohen and his team, owns about 930,000 shares of Buffalo Wild Wings (NASDAQ:BWLD). This gives SAC 5% of the outstanding shares of the restaurant, which had 861 locations as of mid-October (the slight majority of which were franchises). SAC had only owned about 4,000 shares at the beginning of October, so the fund has been buying over the last three months. Find Steve Cohen’s favorite stocks.
The most recent 10-Q, for the fiscal quarter ending in September 2012, showed revenue increasing 25% over a year earlier. However, earnings were actually down slightly as costs rose, notably restaurant operating costs; the company noted that the average price per pound for chicken wings was considerably higher than it had been. In addition, revenue growth had been primarily due to the opening of new locations; same-store sales were up only about 6%. Net income was still up for the fiscal year, though the growth rate of 9% was fairly low relative to the fact that Buffalo Wild Wings currently trades at 25 times trailing earnings and of course there is the point that growth on the bottom line is likely slowing.
Chicken prices probably won’t continue increasing as much as they have, and Buffalo Wild Wings likely still has plenty of latitude to add new locations. The same-store sales aren’t particularly high- particularly if the company was making an effort to pass on higher costs- but we can assume that the new locations will tend to add earnings. Still, the forward P/E of 20 makes it hard to call the stock undervalued.
A few new hedge fund positions- including that of SAC- allowed Buffalo Wild Wings to make it onto our list of the most popular restaurant stocks among hedge funds for the third quarter (see the top ten list). The largest position among the funds and other notable investors we track in our database of 13F filings belonged to Tiger Consumer Management. That fund, managed by Tiger Cub Patrick McCormack, reported owning about 850,000 shares (check out more of McCormack’s stock picks). We would note that while Cohen and some other fund managers like the stock, a sizable share of the market apparently thinks it’s overvalued: the most recent data shows that 23% of the outstanding shares are held short.
Does it make sense to buy Buffalo Wild Wings compared to other restaurants?