Smart Money Says This Is Why You Should Bet on Yum! Brands Inc. (YUM)

In the meantime, Yum’s stock performance was great in the first half of the year despite facing challenges in its China division, with its shares advancing by over 23% through June 30. However, the concerns about China’s economic slowdown have since put downward pressure on the stock, which is still 13% in the green year-to-date. Going back to the struggling China division, activist investor Keith Meister, founder of Corvex Capital, previously expressed his belief that Yum! Brands would benefit from spinning off its China business. The activist investor suggested that this division has been a drag on the company’s bottom line following the food safety scandal. Moreover, he asserted that the stock had an upside potential in the range of 50% to 90% should the company pursue a spinoff, while the potential value of the entire business was estimated to be in the range of $130 to $160 per share (read more details here).

Let’s now briefly discuss Yum! Brands’ Taco Bell business, which plans to open new “Cantina” restaurants that will serve “tapas-style” appetizers, and alcoholic drinks. The new restaurants, which are set to be opened in Chicago’s Wicker Park neighborhood and in San Francisco later this month, might unlock a flourishing new revenue stream for the company in the years ahead. However, only time will show whether Taco Bell’s transition will be successful. Meister’s Corvex Capital is the largest shareholder of Yum! Brands Inc. (NYSE:YUM) within our database, hoding an activist stake of 15.29 million shares as of June 30.

Disclosure: None