Why ‘Hedgies’ Are Bullish on Cracker Barrel Old Country Store, Inc. (CBRL)

Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) was an actively traded stock among hedge fund managers during the fourth quarter, with the likes of Jim Simons of Renaissance Technologies, Kenneth Squire of 13D Management and Cliff Asness of AQR Capital Management either adding to existing positions or initiating new positions. Other investors who initiated positions in the restaurant include Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, David Shaw of D E Shaw and Roger Ibbotson of Zebra Capital Management.

RENAISSANCE TECHNOLOGIES

Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is a $2.4 billion market cap company that operates its namesake restaurants and retail stores side-by-side in 626 locations across 42 states in the U.S. The stock has risen 27% over the past 12 months, aided by improving financial performance and positive earnings surprises. Despite a negative impact from the severe winter weather during its fiscal second quarter (ended January 31, 2014), the company maintained its full year EPS guidance of $5.60-5.80 for its fiscal year 2014.

Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has been mired in an ongoing battle with activist investor Sardar Biglari, whose diversified holding company, Biglari Holdings (NYSE:BH), is its largest shareholder with a 19.9% stake. In addition to seeking board seats, Biglari had called for a $20 per share special dividend last year; all of these proposals were voted down by other shareholders. Biglari’s latest proposal, disclosed in December, is for the board to consider a possible sale of the entire company to an outside bidder, including Biglari; Cracker Barrel will hold a special meeting to vote on the matter on April 23, 2014.

The stock looks attractive from a valuation perspective, trading at forward P/E and EV/EBITDA multiples of 16.6X and 9.1X, respectively, versus 26.5X and 11.3X, respectively, for its peer group of restaurants. Although Cracker Barrel’s margins are below average, they have been on an improving trend, and the company’s return on invested capital metrics are actually better than peers. With moderate new store openings planned for the rest of the year, the company should be able to return more of the free cash flow it generates back to shareholders in the form of dividends (which currently yield 2.9% and could grow further) and share repurchases. Of course, a sale of the company at an attractive price would also be beneficial to shareholders, but Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) seems to be doing a good job of executing on its plans as a stand-alone business. With its largest stakeholder being an activist investor watching their every move, management has every incentive to continue delivering for all shareholders.

Disclosure: none

Recommended Reading:

Kenneth Squire’s 13D Management Is Betting on These Stocks

Biglari Capital Corp. Reveals Holding Almost 20% of Cracker Barrel Old Country Store, Inc. (CBRL)

Sardar Biglari Releases Highly Confident Letter on Cracker Barrel’s $20/Share Special Dividend

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
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

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors 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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!