Potential Trading Block Outside the Portfolio

Investing Strategies Abandoned Arctic Outpost #13
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I think one of the reasons using TBs works for me is that its usually only involving companies that I have High Confidence in and if it doesn’t work out quickly I am comfortable holding the extra shares.

And example of a company I have used a lot so far this year that fits the High Confidence qualification but is not on the roster has been MELI; although, if push came to shove I wouldn’t mind holding MELI longer term. Another company that I am currently looking at the same way - albeit with a little less confidence, is Dutch Brothers Coffee: BROS.

Now…to be sure, none of the High Growth, really smart kids/posters or services I track has mentioned BROS - ever - but, that doesn’t mean that there isn’t a lot to like there.

Dutch Brothers - Drive Thru Aspiring Coffee King who is just getting started.

https://www.dutchbros.com/

Here is what BROS says about BROS:

“…is a high growth operator and franchisor of drive-thru shops that focus on serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE.” Note: after reading some of their reviews I think the good folks at BROS mean it.

Currently they have just 538 locations (As of the end of 2021) in just 12 states with wide-eyed and bushy tailed expansion ambitions. They are opening additional shops every QtR. I read somewhere that they think they top out at 4000 locations nation wide and that isn’t even considering International potential.

A Few Data Points:

The company had its public debut in mid September 2021 at $36.68. It then stumbled around a bit just like a new born dear before getting its trading legs together and thereafter it spiked to just above $81. That has been its high water mark.

Current Price: $44.22
Range: $32.42 - 81.40
About 45.6% Below its High
Market Cap: 7.23B

BROS first ER as a public company was for FQ3 2021 way back on November 10th, 2021. The report featured A Beats on both EPS and Revenue with Revenue Growth of 49.8%. During the QTR they opened 33 new locations and same store sales increased 7.3%. You can check out that report here:

https://seekingalpha.com/pr/18555981-dutch-bros-inc-reports-…

The company’s second ER was today and featured a Miss of 1 Cent on Non-GAAP EPS and a Beat on Revenue by 4%. Revenue Growth Accelerated to 55.8$. Sequentially Revenue grew 7.9% with same location sales up just over 10%. Press Release and CC Transcript here:

https://seekingalpha.com/pr/18692285?source=content_type%3Ar…

https://seekingalpha.com/article/4492077-dutch-bros-inc-bros…

The company guidance for 2022 was $700 -715M representing 43% growth. Additionally, the company committed to open 125 new locations in 2022.

During the day the stock traded down 6.94% to $44.32.

Ok so here is the thing - BROS ain’t no UPST, MNDY or ZS. Compared to those speedy growth demons its sloth if not a turtle. But Revenue Growth accelerating from 49.8% to just over 55% quarter over quarter ain’t nothing to sneeze at. Moreover, had the company expenses been impacted by $3M or so from going public there bottom line would have looked just dandy. Just dandy - more or less. The point here is that Dutch BROS has more than a decade of growth left in it.

So the long term growth story is a sort of foundational support for the share price regardless of what happens in the next day or so. Does the company have a few warts - why of course it does with the main one being that as an IPO its gonna perhaps be erratic. So what? The Fool says they only recommend stocks that we need to hold for 5 years: thats a lifetime in my system; however, I think BROS is not only a good bet but a safe one as well. Well…as safe as any stock can be in its field. Besides, I haven’t lost any money on a coffee company in months. So…

If BROS sheds another couple of bucks I am going to initiate a position that is intended to be short term - which, if it thens goes wrong - could be a longer term position. Either way, I am interested in it’s story. We’ll see.

All the Best,

3 Likes
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Forgot the Others Receiving Votes category:

MELI At or around $1050 or so. With MELI you just never know.

BILL At or below $210 would be swell.

SE Around $110. Would add them to the portfolio with Scout Team position

Still want to add BILL with Beginning Bench contract.

All the Best,

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I had never heard of Dutch Bros until visiting our daughter at the Univ of Oregon. Going to Dutch Bros was a requirement. And what an experience it is! High energy people making great products in a friendly environment. And super fast. Truly contagious experience.

I wonder if that can be replicated to every store (admittedly, some Starbucks locations don’t feel like a 3rd place, as they have been know to espouse).

I think they just opened a location near to where I live…I should go see if they have recreated the magic so far from Duckland…

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Line of cars all the way around the block at the 2 DBs in Gresham, OR. Neighbor loves just their black coffee but me thinks most line up for the sugary cold versions kinda like milkshakes.

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Hi JP:

Go Ducks!

I’ve got a BROS location going in about 4-5 miles from our home and it will be the first I have seen one. Everything I hear supports that they have managed to replicate the experience - and - if they can really stay on top of that then the 4000 or so locations could be real. We’ll see I suppose

All the Best,

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Morning MSlob:

Never ever doubt the power of sugar in the American diet!

All the Best,

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Ok so here is the thing - BROS ain’t no UPST, MNDY or ZS.

Hey Champ,

I spent a total of 10 minutes looking at BROS. And just at their year-end press release because they
haven’t posted their 10K yet. So the following “analysis” probably belongs in your dumpster.

This analogy popped into my head after reading their release => I can grow my savings account
by 43% each year by borrowing from my home equity line of credit and depositing into savings.
My savings account currently pays less than 1% interest. My home equity line of credit currently
charges 2.5% interest. I bet Lady Ears would be thrilled to hear about the increase in savings!

Best to you,
Ears

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Hi Ears:

The “When you wish upon a star - makes no difference who you are” strategy that has held serve for the last 4-5 years is most certainly bent - but definitely not broke, at least not quite yet.

Everyone likes Apples - right? Both you and the All-Too-Lovely Lady Ears probably have a favorite. Am I close? Now while it is unknown who shops for the Ears family apples - I am betting that whosoever that might be - knows the golden rule of buying apples.

Note: My All-Too-Lovely likes organic Fuji apples while I go with the more common small Red Delicious.

But - and here is the point: The Golden apple buying rule is simply this: Buy no apple that has lost its shine. Take Zoom for instance - still a nice company but definitely lost its shine. Lots of ‘They’ve lost their shine’ finger pointing going on with CRWD as well. On the other hand, for example BILL has some of the shiniest shine of them all just now. Common stuff right?

So what has that got to do with any of our wonderful high flying companies that don’t make any money but enjoy fantastic multiples (now coming down of course but still very, very steep - think, still between Red and Black Diamond of a sort with Green being a definitive Buy signal for high growth.)

Now…with BROS, admittedly the valuation is on the Uh-Oh side at somewhere north of $7.5B or so. But you have to give them credit for putting on the shine: 98 locations added last year and a promise of 125 more this year - on the way to that big, fat, flashy shine of 4,000 potential total. Now that’s some shine!

To your point: Buying apples with shine does not guarantee the apple will taste good. Got it.

All the Best - and please mention to the All-Too-Lovely Lady Ears that she should try those Fuji apples.

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Now that’s some shine!

Reminds me of Luckin. Their lousy business economics forced them to lie about their shine. What you
got was a rotten apple neath that shine.

There’s a big difference between your shiny BILLs and MNDYs and ZSs…and BROS. The first three
have economics that may someday create value, even if not doing so today. BROS economics
looks as though it will NEVER create economic value, even with 4,000 shiny new apples. Compare
their economics to Starbucks when Starbucks was the same size.

Happy trails,
Ears

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Brother Ears:

Despite my immense admiration for you - comparing BROS to Luckin really is hitting below the belt. Having said that - I suppose you are right on target as usual. But even if BROS is nothing but a cheap
machiavellian, tart of a gold digger - I don’t want to marry her, just date her for a bit. Surely that can’t lead to all that much Luckin style calamity?

And don’t forget to tell All-Too-Lovely Lady Ears to try the Fugi apples.

All the Best,

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Surely that can’t lead to all that much Luckin style calamity?

Never. I’m serious. And don’t call me Shirley.

https://www.youtube.com/watch?v=KM2K7sV-K74

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