Bojangles' (BOJA) IPO Is Too Good an Opportunity to Miss

For the average investor, IPOs can be frustrating. In most highly publicized offerings there seems to be little chance of being allocated shares unless you are a major investor, and by the time the shares actually come to market, most of the value has gone. That is why I rarely comment on them until the buzz has died down. A combination of investment bankers who are excellent at squeezing the most from a launch and the initial scramble for ownership usually makes the first few days of trading a dangerous time for the retail investor to get involved.

The best tactic for those in that situation is to identify companies that already make money yet still have growth potential, and buy the shares a couple of days or even weeks after the launch as a long term investment. There is just such a company whose shares are expected to begin trading today on the Nasdaq exchange, but in this case it may pay to be an early adopter.

Bojangles (BOJA) is a North Carolina based chicken and biscuit fast food operation. They have always had a focus on the now trendy (think Taco Bell) breakfast market, with around 60 percent of their sales coming before 11 AM. Those sales are pretty significant, too. Their 622 restaurants generated $430.5 million in revenue in 2014, which represented 15 percent annual growth. Profits also increased last year by over 7 percent to $26 million, which is decent considering the growth rate.

Regular readers may be aware that I live in North Carolina, so Bojangles is a part of the landscape for me, but a measure of their potential comes from the fact that many friends who visit from the Northeast make a trip to this particular fast food joint a required part of their itinerary. Even the millennial generation that has been shunning fast food in general seems to make an exception for Bojangles, if my 20 year old son and his friends are any indication.

Bojangles is offering a product that happens to tie into several trends in U.S. consumer behavior. First, as mentioned above, they do great breakfast business. In an increasingly fast-paced world, there should be little surprise that preparing breakfast at home is becoming an increasingly irksome task for those with limited time, so the growth of that market is only natural. Second, the company has plugged into another trend that I have commented on in the past. The decline of traditional fast food vendors such as McDonalds (MCD) has been well documented, as has the growth of upstarts such as Chipotle Mexican Grill (CMG). Some have attributed that to the emergence of a whole new sector, some kind of “upscale fast casual” concept. I disagree. The shift has not been so much in style as in taste.

Americans are developing an ever increasing taste for spicy food. In addition to chipotle, other outlets providing some hot and spicy menu items, such as Buffalo Wild Wings (BWLD) have seen phenomenal growth over the last five years.

Bojangles is a play on that trend. Their fried chicken is first dipped in hot sauce and has a distinct kick, and their sides include spicy options such as dirty rice.

You may think from what you have read so far that I am an enormous (in every sense of the word) fan of the food, but actually that isn’t the case. Fried chicken just isn’t my thing, but that doesn’t mean that I can’t see the potential of a company that does it well and with enough of a twist to stand out. That is especially true when there is room for growth into some of the most populous areas of the country. The appeal of that growth potential is such that waiting for a possible pullback in the event today’s launch is an immediate success could be a mistake. BOJA is not guaranteed to exhibit the 500-600 percent 5 year appreciation in the stock that CMG and BWLD have shown, but there is enough chance of that to make buying the stock on the launch as a long term investment a risk well worth taking.

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

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

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Martin Tillier

Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.

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