Food Sponsor Bowl Championship
Joel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Now that the Alabama Crimson Tide have won the BCS National Championship, I think looking back at all the game sponsors is quite interesting. Utah State beat Toledo in the Great Idaho Potato Bowl and Ohio beat UL-Monroe in something called the AdvoCare V100 Independence Bowl. While you may not have heard of AdvoCare V100, I found 17 sponsors of college bowl games that are publically traded. I thought it might be fun to see which sponsor has the best stock. In this article I will break down the 4 food-related companies and see which one continues on to the finals. The contenders are Bloomin' Brands (NASDAQ: BLMN), sponsor of the Outback Bowl. Buffalo Wild Wings (NASDAQ: BWLD), sponsor of the Buffalo Wild Wings Bowl, Kraft Foods (NASDAQ: KRFT) sponsor of the Kraft Fight Hunger Bowl, and Pepsi (NYSE: PEP) sponsor of the Tostitos Fiesta Bowl.
Let's look at some characteristics of these companies.
|Market Capitalization (in billions)||1.97||1.41||27.01||107.72|
Well, this could be difficult to judge. We have two new companies -- Bloomin' Brands and Kraft. Then we have mega-cap Pepsi which has a market capitalization 75 times bigger than small-cap Buffalo Wild Wings.
Bloomin' Brands owns Outback Steak House as well as Carrabba's Italian Grill, Bonefish Grill, Fleming's Prime Steakhouse and Wine Bar and Roy's. In 2007 the company was known as OSI Restaurant Partners, Inc. and was taken private by Bain Capital Partners, Catterton Management Company and some OSI executives. The new Bloomin' Brands went public this past August and both Bain and Catterton still own shares in the company.
The company is heavily indebted -- the 1.57 Billion in debt translates to a debt/equity ratio of an astounding 718. Throw in a current ratio of .65 and Bloomin' Brands is a risky stock
Buffalo Wild Wings
Buffalo Wild Wings is a growing restaurant chain that serves beer and food in restaurants filled with sports on TV. I will admit to being both a customer and a shareholder of Buffalo Wild Wings. Back in the '90s I recall going to the BW3s (as it was known back then) on Lincoln Avenue in Chicago quite a few times. Now I go to a few locations in the Chicago Suburbs where my 5 year old raves about the mac and cheese. I bought stock back in 2004 and have seen a 400% return on the shares I still have.
The company uses a mix of company owned and franchised restaurants. They now have over 861 restaurants in 48 states and have moved north to add locations in Canada. In the latest quarter, company owned stores saw same store sales increase 6.2% and franchised stores increase 5.8%. This strong performance is reflected in their P/E of 26. However, with no debt and a current ratio of 1.3, I am a strong believer of Buffalo Wild Wings the stock.
Kraft has undergone yet another transformation in 2012. Years after being spun out from Philip Morris (Now Altria), the original Kraft was renamed Mondelez and the current Kraft was spun out. Kraft retained the US Grocery Brands such as Jell-O, Kraft, Kool-Aid, Maxwell House and Oscar Meyer. The global brands such as Oreo, Nabisco, Cadbury and Tang stayed behind in Mondelez. I admit to not following this spin-out very closely, so I was surprised to see Kraft have such a strong balance sheet and dividend yield. This stock may not be a fast grower, but for an investor looking for consistent results and collecting a nice dividend, Kraft needs to be considered.
Pepsi is so much more than the namesake beverage. They are a multi-national food company. In addition to Pepsi, they also own Frito-Lay (makers of Doritos, Tostitos, Ruffles and Sun Chips), Tropicana, Gatorade, and Quaker Foods (Oatmeal, Granola bars, Aunt Jemima and Cap’n Crunch). The company is making news as it tweaks the artificial sweetener used for Diet Pepsi. While they have an enviable amount of global brands, I see this mega-cap stock as being stuck. It's too big to grow fast and while the 3% dividend yield is nice, it is not enough for me to buy the stock.
And the winner is ...
We can start by comparing the large cap food stocks -- Kraft has a compelling story as they are really a new company with opportunities to be focused just on US grocery brands. Pepsi on the other hand seems to need a large change to move their shares and does not seem to be worth the risk. Kraft is the large cap winner.
For the smaller cap stocks, it really is not close. Bloomin' brands has mountains of debt and controlling shareholders that will eventually sell stock. Meanwhile Buffalo Wild Wings continues to grow without any debt.
That leaves Buffalo Wild Wings vs. Kraft. Even though Buffalo Wild Wings sells at twice the PE of Kraft, I like their growth opportunities and continue to be impressed. Buffalo Wild Wings will move on to the championship round of the bowl sponsors.
CoachUrMoney owns shares of Buffalo Wild Wings. The Motley Fool recommends Buffalo Wild Wings and PepsiCo, Inc.. The Motley Fool owns shares of Buffalo Wild Wings and PepsiCo, Inc.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!