Dunkin Donuts IPO: What Do Hedge Funds Think of the Restaurant Industry?

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(List compiled by Becca Lipman. Data sourced from Finviz.)

Three days ago TheStreet posted an article titled "Don't Buy Dunkin' Donuts IPO: Value Analyst." Yesterday, they reported: "Dunkin Donuts IPO: Shares Soar." 

You can't blame them for being so cautious about the recently introduced Dunkin' Donuts IPO (DNKN). In fact, many analysts still aren't quite sure what to make of it. 

Dunkin' Brands owns the Dunkin' Donuts franchise and the ice cream chain Baskin Robins. Initial stock price was set at $19/share when it was offered late on Tuesday, it opened at $25 on Wednesday and closed at $27.85/share. Friday's low currently stands at $28.01/share.

So far, so good. But some analysts wonder if investors are simply over-enthusiastic, and whether $19/share might have been overpriced to start with. On the other hand, the company has a fair share of potential growth with further expansion of the franchise west of theMississippi

Y Charts offers this bit of wisdom: "Successful growth stocks, even the ones that go on to make the most astronomical share price gains, are rarely made in the first few months of trading. Especially in the restaurant sector, where investors over-enthusiasm tends to swell PEs."

The article goes on to remind us of Texas Roadhouse (TXRH) and Peet's Coffee & Tea (PEET) which made their IPO investors very happy indeed for a short time...  until their prices dipped below their closing price on opening day. Ouch.

Do you think Dunkin' Donuts cold follow along that path? Or is this another Chipolte in the making, which has grown an impressive 650% since its initial offering? 
 
To help you analyze, here's a list of restaurant stocks that have seen institutional buying over the recent quarter. We found that of the 28 restaurant industry stocks with market caps over $300 million, 18 have seen net institutional purchases over the current quarter. We list the top ten with the most significant buying below. 

Hedge funds think there's more upside to these stocks--do you agree?

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List sorted by institutional purchases as a % of share float.

1. The Wendy's Company (WEN): Restaurants Industry. Market cap of $2.22B. Current price at $5.3. Net institutional shares purchased over the current quarter at 95.3M, equivalent to 31.74% of the company's 300.22M share float. The stock has gained 23.02% over the last year.

2. Bravo Brio Restaurant Group, Inc. (BBRG): Restaurants Industry. Market cap of $421.02M. Current price at $22.16. Net institutional shares purchased over the current quarter at 3.2M, equivalent to 18.36% of the company's 17.43M share float. The stock is a short squeeze candidate, with a short float at 5.41% (equivalent to 5.63 days of average volume). After a solid performance over the last year, BBRG has pulled back during recent sessions. The stock is -6.2% below its SMA20 and -3.17% below its SMA50, but remains 14.61% above its SMA200. The stock has performed poorly over the last month, losing 12.42%.

3. Ruby Tuesday, Inc. (RT): Restaurants Industry. Market cap of $590.46M. Current price at $9.09. Net institutional shares purchased over the current quarter at 4.5M, equivalent to 8.69% of the company's 51.79M share float. The stock is a short squeeze candidate, with a short float at 8.41% (equivalent to 5.6 days of average volume). The stock is currently stuck in a downtrend, trading -13.74% below its SMA20, -12.36% below its SMA50, and -25.14% below its SMA200. It's been a rough couple of days for the stock, losing 17.92% over the last week.

4. BJ's Restaurants, Inc. (BJRI): Restaurants Industry. Market cap of $1.29B. Current price at $46.88. Net institutional shares purchased over the current quarter at 1.8M, equivalent to 7.5% of the company's 24.00M share float. The stock is a short squeeze candidate, with a short float at 16.18% (equivalent to 14.18 days of average volume). After a solid performance over the last year, BJRI has pulled back during recent sessions. The stock is -10.84% below its SMA20 and -6.4% below its SMA50, but remains 15.37% above its SMA200. The stock has gained 82.55% over the last year.

5. DineEquity, Inc. (DIN): Restaurants Industry. Market cap of $951.37M. Current price at $52.59. Net institutional shares purchased over the current quarter at 984.7K, equivalent to 6.36% of the company's 15.49M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.37). The stock is a short squeeze candidate, with a short float at 11.24% (equivalent to 11.09 days of average volume). It's been a rough couple of days for the stock, losing 8.32% over the last week.

6. CEC Entertainment Inc. (CEC): Restaurants Industry. Market cap of $767.80M. Current price at $38.71. Net institutional shares purchased over the current quarter at 844.0K, equivalent to 4.48% of the company's 18.85M share float. It's been a rough couple of days for the stock, losing 7.35% over the last week.

7. Domino's Pizza, Inc. (DPZ): Restaurants Industry. Market cap of $1.64B. Current price at $26.8. Net institutional shares purchased over the current quarter at 1.4M, equivalent to 3.33% of the company's 41.98M share float. The stock has gained 105.1% over the last year.

8. Denny's Corporation (DENN): Restaurants Industry. Market cap of $368.97M. Current price at $3.75. Net institutional shares purchased over the current quarter at 3.2M, equivalent to 3.27% of the company's 97.81M share float. It's been a rough couple of days for the stock, losing 13.05% over the last week.

9. Buffalo Wild Wings Inc. (BWLD): Restaurants Industry. Market cap of $1.18B. Current price at $63.7. Net institutional shares purchased over the current quarter at 363.8K, equivalent to 2.02% of the company's 18.00M share float. The stock is a short squeeze candidate, with a short float at 11.44% (equivalent to 5.94 days of average volume). It's been a rough couple of days for the stock, losing 5.95% over the last week.

10. The Cheesecake Factory Incorporated (CAKE): Restaurants Industry. Market cap of $1.68B. Current price at $28.98. Net institutional shares purchased over the current quarter at 1.0M, equivalent to 1.87% of the company's 53.54M share float. The stock is a short squeeze candidate, with a short float at 16.7% (equivalent to 7.86 days of average volume). It's been a rough couple of days for the stock, losing 6.54% over the last week.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


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