• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Consumer Discretionary

Yum Needs Too Much Patience

A great American growth story turns sour.
By JIM CRAMER Dec 10, 2014 | 11:30 AM EST
Stocks quotes in this article: YUM, FRGI, DIN, JACK

Yum! Brands (YUM) misses again. It goes down big and then bounces back. You would think that this is impossible: how many times can one company miss and yet still bounce back? How many times can a company miss because of Chinese same store sales numbers -- they look like they might be down as much as 20% in the fourth quarter -- and we don't just say "enough is enough, we can't touch this thing?"

And the answer? As long as there is hope that the company might split into four divisions: Taco Bell, KFC, Pizza Hut and Yum International. That's been the reason why it hangs in and it is the reason why buyers and analysts are willing to look the other way at this one.

There's only one problem: the company seems to have no desire whatsoever to take these actions. In fact, the company, as represented by its long-time CEO, David Novak, thinks the structure's good and it is just a matter of time before its fortunes turn around in China and you get good growth again.

There's a new wrinkle that makes investors hopeful that Novak's wrong, though. Greg Creed, a new CEO, is coming from Taco Bell and the skeptics are sensing that he's not as wedded to the current structure as Novak is. The ever-hopeful analysts think that there is tremendous value to unlock here, and those pieces would be worth much more than the whole.

But what if the skeptics are wrong? What if Novak's vision is Creed's vision? Then I think, once again, you are at the mercy of the Chinese food chain and the poor publicity that comes from any spoilage.

My charitable trust owned Yum several times and made decent money in it every time until the end, when we just became convinced that China had it in for KFC and there were no break-up plans.

In a world where there are so many good restaurant stocks to own, stocks like Fiesta (FRGI) group, owner of Taco Cabana and Pollo Tropical, or DineEquity (DIN), which has done a superjob with IHOP and Applebees, or Jack in the Box (JACK) with its red-hot Qdoba business, I don't know why you want to be at the mercy of this particular company, other than profound memories of yesteryear.

Now, it is true that if China were to be "fixed" so to speak, the stock would go a lot higher, in part because there are good things happening domestically at Taco Bell and Pizza Hut. The numbers are better. Plus the lower price of gasoline is a huge windfall for the typical customer of these restaurants.

But I think that it will require tremendous patience to weather the turn, and I believe most people simply will find that length of time and the slaughtering the stock takes periodically for the same issue to be too much to handle, and will ultimately keep a lid on what had been a great American growth story. 

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity | Consumer Discretionary | China | Markets | Stocks

More from Consumer Discretionary

Apple's Price Charts Are Getting Badly Bruised

Bruce Kamich
May 12, 2022 1:10 PM EDT

Here's what the odds favor.

RH and Its Charts Don't Have That Homey Feeling Right Now

Bruce Kamich
May 12, 2022 8:32 AM EDT

The technical signals of the home furnishings provider indicate more downside to come in its stock.

Crocs Is Still Slipping to the Downside on Its Charts

Bruce Kamich
May 11, 2022 7:44 AM EDT

The footwear maker isn't seeing a lot of technical support at this point.

Screening for Deep-Value Stocks Turns Up a Pair of Possibilities

Jonathan Heller
May 9, 2022 10:00 AM EDT

A producer of small appliances and a maker of fishing, camping and kayaking gear pop up as possible value plays.

Bearish Bets: 3 Slumping Stocks You Should Consider Shorting This Week

Bob Lang
May 8, 2022 10:30 AM EDT

These recently downgraded names are displaying both quantitative and technical deterioration.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 03:07 PM EDT PAUL PRICE

    Why Is Walmart Down Big Today?

    Besides its poor earnings report Walmart was way...
  • 07:14 PM EDT PAUL PRICE

    A New, Very Scary Movie

  • 08:51 AM EDT PAUL PRICE

    Advice From the Future...

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login