Buy Hold Sell: From darlings to dogs

Roger Montgomery from The Montgomery Fund and Karl Seigling from Cadence Capital join Sam Willis to take a closer look at two market darlings that have fallen from grace.

[Livewiremarkets]

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[debbiewei]

2 years later to look at Retail Food Group, these 2 gentlemen were absolutely right😁! I always like to listen to these smart people 👍👍👍

[benjaminyoungman]

(RFG) = Avoid, = Avoid, Gosh, RFG should have an investor day at Gloria Jeans Dee Why NSW, where the cafe has turned it's outdoor eating area into a smokers section where you are not allowed to eat. mmmm great business (Cough cough).

[Adam-uief]

The only way DMP was worth the high multiples was if the company achieved scale through expanding and increasing margins due to greater efficiency. The issue is with constant expansion is you group stores closer together and increase competition among store owners. I wonder, do franchise owners view the the Dominos store 10 minutes away as friend or foe? How can a business achieve scale when those in its uniform consider themselves in competition - there is no synergy or teamwork.

Pricing power is another issue. DMP still has authority to dictate price, yet the increased stores and discount priced pizza must really put pressure on the margins of franchise owners. I have actually noticed the days of cheap pizza are over. They are back to selling a large pizza for roughly $20, which is a similar price gourmet pizza shops sell at. And dominos is not as good as the gourment Pizza's out of the woodfire. Furthermore, one of DMP's appeals is its distribution - its technology in terms of online ordering and delivery. However private fast food shops are all on menulog which is basically the same thing. DMP introduce stupid apps such as a countdown to when your pizza will arrive at your door - who gives a F about something so trivial - how much in R&D did that cost to add no real value?

I would imagine there must be a big disconnect between franchise owners and their overlords. DMP is still prives to high at PE multiple of 35. They should stop the growth gimmiicks and increase their pay out ratio from 22%. Because they are destroying value