I greatly downsized PTLO this week. They keep executing their new location plan, but their ER was blah and their 10Q, after a deeper dive, makes me wonder how they ever get out of the mountain of debt their IPO PE firm saddled them with. They can keep doing what they are doing and self-funding new openings (I think) but pretty much barely making much profit along the way. That worked for Amazon, but they came up with AWS out of the blue along the way…don’t see that happening for a hotdog/beef restaurant.
Finally, out my way some of the locations are making noise on unionizing. This would affect profits even more and, imo, probably lead to lower quality and less control over what makes Portillos such a great place to eat. This brand isn’t as simple as opening a coffee shop or small franchise. They do an astounding $9m/AUV per location which is best in class in the industry. That is done by ensuring food quality and cust service are replicated equally at new locations. I think this gets harder and harder.
I used to craaaaaaave Chipotle 20 years ago. Still ate a ton about 12 years ago when I dropped a bunch of weight eating burrito bowls. Now? Over-priced, dirty/unclean tabletops everywhere, and food quality has gone down a couple notches. Didn’t hurt their stock price, but it is sort of a cult now.
I am keeping a token amount of stock as I expect when I look up in 10-15 years that PTLO will still be there and will have expanded locations 10-12%/year during that time, and maybe the national brand will have taken off. But it will be a 1-2% position fr me. Hopefully it grows into something more.
Closed out my other positions, except for ESPR, to beef up cash. Don’t like most prices and don’t like the signs. Been wrong for a while now and probably still wrong for a while to go. That’s ok. Don’t follow random people on the internet blindly.
Why stay in ESPR? It has a fundamental catalyst that has nothing to do with economy (for most part) and certainly can’t be called overpriced. Final CLEAR studies completed earlier in the year, the label expanded as hoped in late March, payers seem to be moving to support lower-cost coverage, their DSE partner keeps having strong growth and Europe label also expands soon, patent extension appears in the bag. They still need to execute, but it has the look and feel of a small cap growth stock with good acquisition potential and/or stock should appreciate if they successfully ramp sales in Q2/Q3 and go it alone.
I like ODD and GEO as smaller caps for diff reasons, but sold ODD out yesterday after a nice ramp (I had been in and out of the stock). GEO I think is tied to election…if Trump, then likely a massive expansion of their monitoring/beds for illegals. Should be a close election so could always reeenter closer to Nov. Hard to call the election as Trump scandals don’t stick (until maybe they do) and Biden might fill a diaper on the public stage somewhere soon. What a couple of winners…what is wrong with our political system, sheesh.
All I got for now.
Dreamer