In this article, we discuss the 3 best stocks to buy according to Adam Wyden’s ADW Capital. To read the detailed analysis and investment philosophy of ADW Capital, go directly to 6 Best Stocks to Buy According to Adam Wyden’s ADW Capital.
3. RCI Hospitality Holdings, Inc. (NASDAQ:RICK)
Number of Hedge Fund Holders: 15
RCI Hospitality Holdings, Inc. (NASDAQ:RICK) is a hospitality company that operates strip clubs, nightclubs, bombshells, sports bars, and restaurants. Furthermore, it operates a few dance clubs and also has the license to sell Robust energy drinks in the US.
On July 28, RCI Hospitality Holdings, Inc. (NASDAQ:RICK) acquired Cheetah Gentlemen’s Club in Florida. The company will own all the real estate associated with the club. The deal was closed for $10 million in cash and $15 million in two 10-year, 6% seller financing notes. The club is RCI Hospitality Holdings, Inc. (NASDAQ:RICK)’s 15th club acquisition in the fiscal year. According to the management, the club is expected to generate $4 million in adjusted EBITDA.
On September 1, RCI Hospitality Holdings, Inc. (NASDAQ:RICK) declared a quarterly dividend of $0.05, payable on September 27 to the shareholders of record on September 13. Moreover, the company has been actively participating in shareholder returns. In the previous two quarters, RCI Hospitality Holdings, Inc. (NASDAQ:RICK) repurchased 255,962 shares worth $14.31 million, at an average price of $55.91 per share.
As of the second quarter of 2022, out of 895 hedge funds, 15 funds held bullish positions in RCI Hospitality Holdings, Inc. (NASDAQ:RICK), collectively valued at $60.7 million. ADW Capital owned the most prominent position, with 899,000 shares worth $43.476 million, representing 20.51% of the fund’s portfolio.
Here is what Greystone Capital Management had to say about RCI Hospitality Holdings, Inc. (NASDAQ:RICK) in its Q2 2022 investor letter:
“As I’ve said before, a frustrating element of today’s market environment is having to watch one of our businesses perform brilliantly quarter after quarter while the stock price either declines or barely reacts to positive operating results. RICK continues to perform well in both their nightclub and Bombshells segments, with their recent 11-club acquisition set to contribute nicely to both the top and bottom line during FY22, while Bombshells growth will continue as the company expands both corporate and franchise locations. In January, RICK stock reached an all-time high of $92/share, only to decline nearly 50% to today’s price as macro concerns dominate the mood and capital flows away from retail, consumer discretionary and restaurant stocks. While RICK’s industry/sector is a tough one for many investors to wrap their heads around owning right now, I believe the company is being unfairly lumped into the broader restaurant and consumer discretionary categories while being compared with weaker and less attractive peers. So why would we want to own RICK? In terms of navigating the current or potential economic environment, RICK’s variable cost structure, balance sheet and access to capital provide significant advantages. The business has pricing power on both the service and alcohol sides, has assets to monetize, and is on a mission to acquire another $20mm of EBITDA by 2023 via accretive M&A where they serve as the buyer of choice for mom-and-pop nightclub operators. Should they achieve this goal, shares would be trading at around 5x next year’s EBITDA making RICK one of the cheapest stocks in the entire restaurant universe. This isn’t lost on management, who are repurchasing shares hand over fist at a high free cash flow yield while the stock trades at unreasonable levels…” (Click here to see the full text)
