Beyond Meat, the manufacturer of plant-based burger patties that you can find at retailers like Target, has seen its stock climb from $30 during its May IPO to $151 today. The company, which earns $40 million in revenue on a few million in profits, is currently valued at $9 billion for a price-to-revenue ratio of 225. The P/E ratio would be like 2,000. Since meat alternative products are doing well with taste tests right now, and there are some markets that are reporting low inventories, the stock price of this business is being bid up on an almost weekly basis right now.
My prediction is this. On June 17, 2024, Beyond Meat will trade at a lower price than the $151 than it is trading at today [June 17, 2019].
An old joke that Peter Lynch often brought up when given the opportunity to give a speech went as follows: Lynch would describe a press release that has legendary Magellan mutual fund trounced the S&P 500 by five, even ten percentage points in some years, and later that day, he’d get a call from a client saying, “Yeah, that’s nice, but why’d you buy that dog Bethlehem Steel? You lost 80% on that one!”
The example was used to show how irrational some clients can be; even when your returns are in the top 1% of all investment managers out there, some people can still find something to complain about (as an aside, that is why the truly successful mutual fund managers quickly exit the public domain once they have made “enough”, and then they tend to go super private by either managing their own money or investing privately on … Read the rest of this article!
There was a moment in 2016 when Hershey stock was trading at $82 per share while earning $4.41 per share in profits for a valuation of 18.5x earnings. It was something that struck me as an example of “buying a wonderful company at a fair price”, and I purchased shares. The stock briefly rose to $113 per share for a rapid 37.8% increase. By June 2018, Hershey was down to $92, for a 12.2% gain.
Did that bother me in the slightest? No, because Hershey was growing its profits along the way. Profits per share in $4.41 (2016) had climbed to $4.76 (2017) then to $5.36 in 2018. The company was growing profits at a 10.25% compounded annual growth rate. It was moving along, doing what it has always done.
The best hamburger I’ve ever eaten in my life was at a Whataburger in Dallas, Texas within driving distance of the DFW Airport. For like three bucks and tax, you would get this huge piece of meat that was larger than anything that you could find at another restaurant. And for a few more pucks, you get a huge dollop of fries and a gigantic soda. I loved it. The guy who founded the place, Harmon Dobson, famously stated that his goal was to make a burger so big that you’d have to hold it with both hands to eat.
The basis for the burger chain’s business success is because nothing about it seems like it was run by MBA graduates and generic corporate executives. In a world where alternatives like McDonald’s have specific instructions for the … Read the rest of this article!