Buy, sell or hold is what I still get asked on the regular.
Unfortunately, ladies and gents, investing is not that straightforward. And, honestly, me saying to buy a stock today may prove to be a dumb decision if some event pops out of the blue a week later and crushes the stock. Chances are the rush to say "buy" caused me to overlook several critical elements to the investment thesis. I am a big believer in patience, thorough research and going above and beyond in trying to determine how a company ticks. Love analyzing execs.
Great example: I chatted with the folks at PepsiCo (PEP) on Thursday. Every time I talk to the company, I am amazed by the depth of knowledge each key person, at various divisions, has on their subjects. I can tell you this is not the norm in corporate America -- I have come across tons of people who are missing the "it" factor, which to me questions whether the company should be invested in. But this type of people analysis is important to do if you can.
Here are three companies I would be digging into for some long-term wagers.
Yum! Brands (YUM): One of the more enjoyable companies to cover. Its people bring us new products to taste-test. Teams are always super-responsive to inquiries. But I left concerned about the medium-term sales outlook on the business following earnings earlier in the week. I find it worrisome that Pizza Hut could put up a 1% same-store sales gain in the U.S. while Domino's (DPZ) logs a 12.8% increase. When I see such a large performance disparity, it suggests one company is doing things very right and the other is doing things very wrong.
Pizza Hut has made nice strides in the past two quarters on digital ordering and value marketing. However, a ton of more work needs to be done to crack into the dominance of the pizza category on the part of Domino's and Papa John's (PZZA), and increasingly in dense urban areas' upstart fast-casual pizza chains. Further, I wanted more meat on the bone from KFC China in the second quarter as the brand unveiled a host of new products deigned to grab the attention of consumers. With the bar set high on KFC China's performance for the balance of 2015, and Pizza Hut U.S. continuing to struggle, a wager against Yum! may be OK. Rooting for the company to fix things, though. (Papa John's is on TheStreet's Daily Swing Trade Watch List.)
Domino's: Conversely, I think the market got it wrong in their reaction to Domino's earnings on Thursday. Sure, the stock has surged over the past year, but bidding it down almost 3% on crazy-strong sales numbers seems wacky. I talked with Domino's CEO J. Patrick Doyle post-earnings on Thursday and was left impressed that the company, despite its success, still has its head down and is working hard to sustain its performance. I suspect going into the end of the year the company may launch a new menu item to coincide with a loyalty program, the latter which has worked quite well for Papa John's. I would be a buyer of Domino's if not an owner of it currently.
Kellogg's (K): This is one of the least responsive companies in the packaged goods space in terms of interaction. And that is unfortunate because it should be unleashing its top executives to try to spin a positive story on what is a horror show. General Mills (GIS) is dusting Kellogg's on cereal innovation, snacks innovation and is expanding into new areas such as organic soups. You want to pay a higher multiple to own a company actually solving the challenges it faces in an industry. I don't see Kellogg's moving quickly, and believe it needs a deep restructuring. Until that happens, expect further disappointing results. If the ugly numbers persist, I think it could be an attractive buyout. For now, however, this would be a name to play to the downside.