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[Beginning of
Cramer's
verbatim
comments for
this segment...]
Jim:
Tonight, we are
doing a not so
blind taste
test… which fast
food stock has
the most room to
run… I could
sample all of
the burgers and
fries here, but
I do not want to
throw up all
over this
expensive set…
so instead, why
don’t we look at
the
fundamentals… if
you want a
healthy stock of
a healthy
company if not
healthy eating,
then
McDonald's
(MCD*)
is still the
place to go…
especially after
the great
numbers
announced this
morning… but
maybe we want
something more
sizzling… I am
starting to see
a turn around in
another fast
food player,
that I have
avoided, stayed
away from…
because it has
been expensive
on earnings… it
did not have
much momentum…
and, frankly, it
was not that
well-run...
Now, all of these
things are starting
to change… if fact,
this company is
finally starting to
live up to a variant
of its old slogan…
Wendy’s, it is
getting better here…
with its stock
trading at $5 and
change, I think that
Wendy's Arby's Group (WEN)
is finally worth
owning… because the
turn is real… why do
I think that?… first
of all, give me some
credit, I have been
pretty good at
recognizing turns in
the fast food game…
I said that I
thought
CKE Restaurants Inc.
(CKR), that is
Carl’s Jr. and
Hardees, was a buy
at $7.73 back on May
22nd.. as a
speculative turn
around… and it was
not just because of
their entertaining
ad campaign… that
one, even though
Hardy’s hasn’t
really turned, and
it has always been
Carl’s Jr.…. it is
up 20% since then…
and I think that
that was a much
riskier call than
Wendy’s… given that
Wendy’s has a much
stronger brand… and
CKE has got a ton of
business in a poor
place called
California… where
they can no longer
afford $6 juicy
burgers.
So what makes me
believe in Wendy’s
turn around?… Why do
I think the stock is
cheap?…
First of all
this is a company
that owns about a
billion dollars
worth of real
estate… 629 Wendy’s
locations, where it
owns the land and
the building…
another 585
locations where it
just owns the
buildings… and 138
Arby’s locations…
and these could
become more valuable
once real estate
prices start going
up again… now this
is a little contrary
view, but I think
that it is going to
happen… now given
that the companies
market cap is just
$2.3b, the real
estate piece is
huge… I think the
value of the Wendy’s
brand is worth more
than the $1.3b that
you are left with
when you subtract
out the real estate
value....
That is just
valuation… we do not
buy just on
valuation… what
about the actual
turn… on Thursday
Wendy’s reported a
pretty good
quarter…I have been
waiting for that
quarter… I did not
want to jump the
gun… I wanted to be
sure that people who
were thinking the
turn is for real…
and the quarter was
because of solid
execution on sales
and cost cutting…
remember, I was
worried about those…
something that
should help bring
the stock back into
favor and restore
some credibility
with the street
after the companies
first quarter
earnings miss.. same
store sales and
margins both rose
nicely at Wendy’s…
and while same store
sales at Arby’s are
still declining… the
decline is not as
bad as it was… comps
were down 4.7% in
July vs. 5.8% last
quarter… let’s call
it less bad… and
management says that
is sees significant
and quick
improvement in
margins as sales
improve across the
board… I could not
believe the stock
did not go up more
on this.
This is a company
that is increasing
sales and increasing
the amount of money
that it makes in
profit that it makes
on each sale… the
growth prospects of
Wendy’s, they are
real… the company is
revamping its
breakfast menu… a
test at 600
locations… a roll
out across the board
expected in 2011...
breakfast represents
about 22% of all
quick service
restaurants… but at
Wendy’s, only 2.2%…
I regard it as a
gigantic long-term
opportunity.
It is also going
international… good
news given its
saturation in
America… it has got
about 170 stores in
the Middle East,
Africa and Asia that
it has got planned…
I know that is
small, but it is a
start… and we know
from McDonald’s and
Yum! Brands (YUM*), that
international is
where the growth is…
the company has been
making changes to
its menu, kitchen
layout, store
designing… again
execution getting
better… with the aim
of converting some
stores into dual
brands Wendy’s and
Arby’s… same thing
if you go to a KFC
you see a Taco Bell
next to it, all in
the same complex…
that improves sales
and profits… it
worked for Yum!,
which
my charitable trust,
ActionAlertsPlus.com
owns… and I told my
subscribers this
weekend that it
could go much
higher… I gave it a
1 ranking… so I
think that it is
pretty good at these
levels… I feel the
same say about
Wendy’s… I think
that it is going to
work for Wendy’s.
At both Wendy’s and
Arby’s, the company
has been pushing its
value menu to
attract customers…
but the brands,
especially Wendy’s,
are strong… the Gap
ranked Wendy’s the
number one mega
chain in three
different
categories… best
food, best
facilities, and best
overall… I say that
it has the
Danny Meyer
hospitality
quotient, remember
the guy who wrote “Setting The Table”,
restauranteur in New
York… at least it
has got as much
hospitality as a
fast food joint
focused on selling
cheap stuff can
have… it just needed
to start
capitalizing on that
fact… something that
is finally
happening… although
it has been a long
time coming… my
Short Hills Wendy’s,
best of show in my
fast food panoply of
McDonald’s and
Burger King… and I
think the fries,
especially the
Biggie Fries, are
badly underrated.
The bottom line…
▼ ▼
▼ ▼
▼
 The
Bottom Line!:
The turn in
Wendy's Arby's Group (WEN)
is real… even as I
am a distinct
minority, judging by
the lethargic stock
price… and I think
that this $5 fast
food stock could go
much higher… thanks
to its move into
breakfast, its
international growth
opportunities, its
plans for dual
branding with
Wendy’s and Arby’s…
and its execution…
it is getting better
here…. I am calling
this "the son of CKE,"
the next big fast
food stock to make
its move to higher
territory.
[verbatim recap]
[end of segment]
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