RBD - Restaurant Brands

[winner69]

I hope you saw my 11th August RBD Blog on sharechat Winner

http://forum.sharechat.co.nz/showthread.php?t=2033

That was my quantitative case for my fiendishly astute planned selling. I used 'normalised earnings'. Not sure if that matches your 'owner earnings', but I don't have any more cashflows that I wanted to include. Paradoxically, you might look at my earnings per share model generated figures in a different way (compare to eps FY2011 actual forecasts), and brand me as a fool for selling. So what do you sharechatters reckon? Am I fiend or fool?

SNOOPY

Good stuff Snoopy ... table a bit hard to read but I get the gist

Probably what it says that the time to buy was when it was 95 cents eh and then you woulfd get Warrens 15% pa returns

Agree buying now one might struggle to get 15% pa for the next 10 years

You could have killed the FA and TA argument once and foe all if you had done that analysis back when the shareprice was 95 cents .... Warren (alais Snoopy) and Phaedrus would have been in agreement ..... fundamentally a great price .... shareprice trending up .... and the directors buying .... what other signals did one need

[Snoopy]

You could have killed the FA and TA argument once and for all if you had done that analysis back when the shareprice was 95 cents ....

I did the analysis a year earlier Winner. When the share price was 95c, the eps five year record was 14.2cps, 13.8cps, 4.1cps, 6.1cps, 6.2cps. Not enough of a positive trend there to allow Warren's 10 year spreadsheet calculation to be valid. So 'Warren' would not have bought. Using a different sort of FA you might have bought on yield (historic gross yield 11% - div 3+4cps -, when sp was 95c), as I did. But some of those ardent TA guys consider dividends 'not real'. Dividends don't appear on those charts so ardent TAers miss out on this kind of thing.

SNOOPY

[Snoopy]

I know how you guys just love charts. So here is my FA chart showing how fiendishly clever I have been in retaining most of my shares in RBD.

The stark thing about those nine years of results is the big step up KFC has taken in FY2010. Some would argue that over the long term and considering history this is unsustainable. However if you look at the after tax results for Pizza Hut you can see that branch of the business is still losing money, around $3m per year by my estimates. Up until last year there was no real way to fix this. Now with the option of offloading restaurants that will never be profitable for a corporate owner to private buyers there is a real possibility that over the next few years these Pizza Hut losses will go. That means even if KFC does slip back to their historic profitability levels, there is every prospect that current levels of group profitability will be stable as far out into the future as we can reasonably see. The other point this chart makes clear is that Starbucks is effectively an irrelevance, and an unnecessary distraction for management. The sooner RBD offload this chain the better IMO.

SNOOPY

[Phaedrus]

I notice that Phaedrus has subtley changed his RBD exit strategy. The last chart attached to post 1513 was based on an ordinary price scale which would have had Phaedrus starting to sell out when RBD breached that trendline when it bottomed out at $2.25 over the last month. The chart of Phaedrus post 1549 now has a logarithmic price scale with last months price wobbles still well above the trend line, presenting no reason to sell.

Snoopy, there are many differences between those 2 charts, none of them particularly subtle. This is not surprising because they were set up for entirely different purposes. In the 1513 chart (page 101) indicators were all optimised for the long downtrend, with a view to providing timely BUY signals - and they did this very well indeed. While these same indicators could be used to provide an exit strategy, this is most certainly not what they were set up for. The recent 1549 chart (page 104) utilised the same indicators, but this time their parameters were optimised for the current uptrend, with a view to providing SELL signals when it weakens or ends.

'Warren' would not have bought.

His loss eh? I guess it is possible to make ones entry criteria too tight and miss out on bonanzas like this one.

Using a different sort of FA you might have bought on yield when sp was 95c, as I did.

But Snoopy, the same approach also had you buying RBD "on yield" at $1.75, $1.60, $1.30, $1.26, $1.24 etc etc. Perfect examples of the folly of buying when a stock is in a downtrend. You would have done much better waiting for the long downtrend to end before buying, regardless of yield.
By way of comparison, conservative technical indicators fired off buy signals between 65 and 75 cents.

Some of those ardent TA guys consider dividends 'not real'.

TA advocates are well aware of the fact that dividends are real - it's just that they are not fixated on them the way some fundamentalists are. The big money is made by capital gains, not dividends.

Dividends don't appear on those charts so ardent TAers miss out on this kind of thing.

No they don't! This must be galling for you Snoopy, but "ardent TAers" get dividends too! About one cent a month over the 17 months that they have held RBD - while the shareprice has been rising at well over 10 times that rate. Dividends pale into insignificance in the light of gains of that magnitude.

[Snoopy]

But Snoopy, the same approach also had you buying RBD "on yield" at $1.75, $1.60, $1.30, $1.26, $1.24 etc etc. By way of comparison, conservative technical indicators fired off buy signals between 65 and 75 cents.

Yes, but thanks to my timely selling my average RBD buy price is now back in that 65 to 75 cent range.
And the shares I have left are still worth twice the dollar amount of the next share in my NZX portfolio.

TA advocates are well aware of the fact that dividends are real - it's just that they are not fixated on them the way some fundamentalists are. The big money is made by capital gains, not dividends.

I think long term in the NZX its 50/50 capital gains vs dividends.

SNOOPY

[Snoopy]

His loss eh? I guess it is possible to make ones entry criteria too tight and miss out on bonanzas like this one.

Warren misses many investment opportunities because of the kinds of companies he believes his team is competant to analyze. It particular Warren doesn't like 'turnarounds' like RBD was. But don't write off Warren's methods with RBD yet. If the share price were to take a decent dip in the near future, he would be buying RBD, probably for keeps.

SNOOPY

[Snoopy]

Snoopy, there are many differences between those 2 charts, none of them particularly subtle. This is not surprising because they were set up for entirely different purposes. In the 1513 chart (page 101) indicators were all optimised for the long downtrend, with a view to providing timely BUY signals - and they did this very well indeed. While these same indicators could be used to provide an exit strategy, this is most certainly not what they were set up for. The recent 1549 chart (page 104) utilised the same indicators, but this time their parameters were optimised for the current uptrend, with a view to providing SELL signals when it weakens or ends.

So your justification for using a linear share price scale when assessing downtrends and a log scale in assessing uptrends is what?

SNOOPY

[winner69]

Snoopy me old mate ..... Average cost of about 70 cents eh ... obviously calculated by using the 'profits' on some sales to lower the overall cost.

A methodology that I find rather (can't find the right word) ..... and the answer could cloud your judgement a bit.

Why don't you sell 28% of your existing holding and then you could say that whats left are free ..... cost you zilch .... zero ... nought .... surely a great opportunity to average down even more

Then all discussions/debate between you and Phaedrus would be dead .... you win lock stock and barrel

[Phaedrus]

So your justification for using a linear share price scale when assessing downtrends and a log scale in assessing uptrends is what?

Generally speaking, log price scales should be used - regardless of the direction of the trend. Very occasionally a linear price scale gives a trendline that better monitors the price action, making it the preferred option.

Use of a log price scale to monitor RBD's long downtrend resulted in multiple trendline-break "buy" signals, none of which were confirmed by any of the many other indicators being used to monitor this downtrend. A linear price scale gave better correlation in this instance.

Similarly, use of a linear price scale to monitor the current uptrend resulted in a trendline-break "sell" signal at $2.33. Again, this premature, isolated signal was not confirmed by any of the many other indicators being used to monitor the uptrend. As you can see, the usual log price scale gives an as yet unbroken trendline.

It is of course not good practice to act on the basis of any single, isolated and unconfirmed signal.

[Phaedrus]

If RBD were to take a decent dip in the near future, Warren would be buying RBD, probably for keeps.

WB is more of a trader than you think, Snoopy.

You might be surprised to learn that his median holding period is one year......................

Only 20% of his stocks are held for more than two years...............

and approximately 30% of his stocks are sold within six months.