Could not agree more. It’s just a matter of time horizon. All companies and their stock price go through troubled periods, and it’s been my experience, fwiw,with dozens of companies to just ignore the details of the moment and let it rebound in time.
It seems to me that there are two rational ways to try and predict the future for a company.
- Consider the long term and short term - this is what Saul does, and what I try to do.
e.g. SHOP - In the long term I have no idea how big they’ll get, but in the short term I expect (at least for the next few years) that they’ll keep doing what they’ve been doing – growing at a torrid pace, yet not completely ignoring profitablity (which for now just means keeping the losses small as they reinvest relentlessly).
- Consider the long term and not worry about the short term
e.g SKX - If you think they’ll be the size of ADIDAS or NKE or even UA some day (well, some day in the next decade or two), you need not concern yourself with the short term. Just buy and wait, and if they get to a market cap of 25B some day, you’ll most likely have beaten the market.
This is why I asked the market cap question, and why Bob wisely keyed in on it. CMG was already over 20B before this debacle. They’re of course around half now, which is still like PNRA + JACK + WEN + SONC combined. None of these have margins anywhere close to a MCD, by the way. About half.
It’s hard to find exact comparisons for CMG. Maybe PNRA, JACK, WEN and SONC don’t cut it. But if your investment thesis rests on CMG becoming the next MCD, you may need to rethink, because at least thus far, MCD is one of a kind.
So be careful about what you’re inferring for the future. Will CMG truly break the mold and be as profitable as MCD? Note that even SBUX hasn’t been able to achieve those margins, and they have an addictive, high-margin, en vogue product and massive cult appeal. And even MCD’s margins seem to have come down in recent years! Food is a tough business.
Will CMG get back to rapid growth – maybe 20% again – until 10 to 20 years from now they have 3 or 4 times as many restaurants as they have today? No one in this thread had said that, and I don’t think it’s likely, but…
If you believe the future will be rosy enough in CMG long term, maybe a buy and hold attitude makes sense. Just realize your assumptions and how they might be incredibly optimistic.
Bear