Veteran Hedgeye Restaurants analyst Howard Penney has some salient advice for investors searching for profitable opportunities (both long and short) in his sector.
“I’ll say this until I don’t do this job anymore,” says Penney. “The single most important restaurant statistic to judge any management team, and understand where stocks are going, is return on incremental invested capital.”
Penney has been following the sector closely for nearly two decades. In the brief video above, he uses one of his long ideas Buffalo Wild Wings (BWLD) to highlight how the restaurant and sports bar chain has mismanaged its capital spending over the last 10 years. He also explains what the company can do to increase profitability.
“They won the battle. There’s no one out there that’s going to create another Buffalo Wild Wings. They just need to be more rational with their capital,” Penney says.