Buy Hold Sell: From darlings to dogs

Buy Hold Sell

We all love a good hotdog, but less so when the meat is on the turn. So in this special episode, our expert panelists give two former fast-food favourites the ‘sniff test’. Join us as Roger Montgomery from Montgomery Investment Management and Karl Siegling from Cadence Capital talk with Sam Willis from BTIG about their views on Retail Food Group and Domino’s Pizza, both of which have given investors severe indigestion over the last 12 months. Tune in to hear why drones dropping pizza in your mouth may not worth a PE of 65 times, and to hear a story of Roger’s bid to become a Domino’s franchisee, in this latest exclusive from Livewire.

Key points:

Retail Food Group (RFG):

Once a market darling, it has fallen over 85% since early 2017. We ask whether it is time to venture out there? Or is it a case of ‘buy when assets are going up, and sell when assets are going down’ as Karl says. The stock may have grown its profits four fold over the years, but grow its equity even faster. The stock looks distressed, and could further contraction be on the cards?

Domino’s (DMP):

Is Domino’s any different? Possibly not. Roger tells a story that suggests that their franchise model is not sustainable over the long run. Cadence has been short the stock, and even after falling from $70 to $45, Karl thinks the valuation is still high and suggests the share price is only half-way through its journey south.

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Comments

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Gareth James

Prefer the more relaxed and informative style of this presentation than the usual quick grab...we need background and analysis rather than three sentences each. Thanks.

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Michael Whelan

Agree with your comment, Gareth. A lot better than the quick grab as you highlight. Is it a case with RFG and Dominos along with TRS, Specialty Fashion, Big W and others than these businesses simply become "unmanageable" at some point and more so if combined with aggressive acquisitions and roll-out strategies ?

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Pete Latham

Agree with Gareth. The more information, the better. The "chatty" relaxed format is more akin to the old BRR Friday Afternoon Round Table discussion that I enjoyed greatly. Two great fund managers whose opinion I value and would like to see more of in these segments.

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Alan CTHGPRO

Interesting comment there by Roger. He said he rang up to buy a dominoes franchise and said great I can buy 5 and make $300K a year. The seller replied how can you work in 5 at the same time? Dominoes have stated the optimal number of stores to own is 3-5 for their franchisees. So either Dominoes or Roger is not telling the correct story? I do not hold DMP but would like to know the answer to this difference.

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James Marlay

Gareth, Michael and Pete - thanks for your comments on the episode today. The format of today's episode is consistent with the 'thematic' content that we've been producing for some time. The stats show that the short punchy Buy Hold Sell format is very popular with many of our readers (it's consistently our best rated content). To cater for those members (like yourselves) who enjoy the deep dive content we have recently introduced two new series. Namely our fund manager videos and the "Rules of Investing' podcast. These are typically released as the headline content on our Weekend Edition. Our members all have different tastes on content and we try to provide a mix of short form, long form, written, video and audio content. Not everything will be your cup of tea but I think there is plenty on offer to satisfy most members. Thanks again for the feedback - we have more of this style coming next week with a focus on banks and financials. James

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Michael Whelan

James - Many thanks for taking the time to reply. With RFG and DMP getting plenty of publicity of late, I think this 'thematic' format works very well. Including someone like Collins Foods in the discussion could have been interesting too. Recalling that Don Meij of DMP was on Undercover Boss Australia a few years ago and pledged to work in the stores once a month, I wonder if he's been able to keep that pledge ? Recalling the "Geoff and Charlie" show last year, when are those chaps coming back for (another) encore ?

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SR V

For what it's worth, I like the longer, more detailed discussions on B/H/S.

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