Tuesday, April 24, 2012

Wendys Article

In this article, I consider another stock from the sub-$5 world: Wendy's(WEN_). I am long WEN and consider it a sensible speculative play for the aggressive section of long-term investors' portfolios. Wendy's actually pays a small dividend ($0.08 per share for a yield of about 1.7%). That helps ease the pain of the stock's pullback to below $5 and the boredom often associated with scaling into a relatively stagnant position. I would not be surprised to see WEN trade range-bound for some time.
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Investors love turnarounds. They just do not like sitting around waiting for them to happen. As such, I could see WEN spiking on strong sales or further stumbles by rival (and now No. 3) Burger King. Until the company shows that it's multi-year turnaround plan is starting to show material results, I do not expect the stock to be able to sustain upside.
In some ways, Wendy's is attempting to do what Domino's(DPZ_) has done. Over the course of the last few years, Domino's pulled off a turnaround of epic proportions. The company essentially trashed itself publicly, ridiculing itself for cardboard-like crust and sauce that tastes like it came out of a can. Domino's laid out and executed a plan to improve the taste and quality of its food. It made an aggressive push to make online ordering more interactive and "social." Both moves have paid off big time. Over the past two years, the stock is up about 133%.
While Wendy's has not been as self-deprecating as Domino's, it has, for all intents and purposes, admitted errors in its ways. Its menu has undergone wholesale changes, its burgers are no longer square and, slowly but surely, the company is remodeling its stores. A makeover process of that scale takes time, whereas Domino's did not have to worry about overhauling brick-and-mortar stores.
In 2011, Wendy's remodeled 10 stores under its "Image Activation" program. It expects to overhaul about 50 more in 2012, which will lead to higher capital expenditures that CEO Emil Brolick expects to level off over time:
In 2013 and beyond, we expect to generate further economies of scale and reduce unit investment, with the goal of more rapidly reimaging a significant portion of the Wendy's system. All our customers deserve the kind of Wendy's experience that has been created in our new Image Activation restaurants. It's a relatively slow process, but likely a worthwhile one.
When you compare shares of DPZ and WEN, you see similarities. Both companies fell on hard times and their respective stocks stagnated. Domino's successfully turned the corner and the stock followed. Wendy's has yet to fully enter that crucial pivot point, but it could be headed that way.
As a long-term investor, there's really nothing better than accumulating a stock like WEN (or DPZ about two to three years ago) during this period of stagnation. While there's considerable risk associated with the play, the dividend decreases your exposure slightly. Plus, if you're scaling in somewhat conservatively over time, you're not hampering your personal cash flow. Accumulating over a period of years can lead to a formidable position, but it's not nearly the same as going all-in the day before earnings.

This article is from TheStreet.com.   Let's hope Wendys gets out of their funk soon.  Tony

Sunday, April 22, 2012

Patience and Stock Investing

Patience is one of the most important things to practice when investing in company you really believe in.  Wendys (WEN) has been trying my patience for the last two years.  The turnaround had been much slower then I had envisioned.  Still I have collected the 1.6% dividend while I have patiently waited for the company to turn the ship around.  My average cost per share is slightly higher than the current price so I'm under water right now.  I'm not abandoning ship yet.  Hopefully my patience will be greatly rewarded.  Good luck investing.  tony

Monday, April 16, 2012

Wendys Update

I was traveling this weekend and ate at two different Wendys. Something I noticed they are slowly raising the prices of their value menu at some locations. Both locations were still busy so let's home the higher prices stick and head straight to their bottom line. I mean $1.19 is still a bargain for their junior cheeseburger deluxe. If the 20% higher price is all profit they should have a good quarter. Still love the company short and log term. Good luck investing. Tony

Saturday, April 7, 2012

Wendys (WEN)

I love the new Chicken sandwich. They have been slowly raising the prices on their value meal. The turnaround is going nicely. Just have to wait for the stock price to catch up with it. Love the fact they passed Burger King to become number 2 among the burger chains. Buy and hold this one for the long haul. Good luck investing. Tony

P.S. - This is my 100th post on this BLOG. Look for great things in the next 100 posts too!