LRT Capital Management, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. A return of +30.47% was recorded by the LRT Economic Moat strategy year-to-date, putting its 24-month return to +4.34%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
LRT Capital Management, in its Q4 2021 investor letter, mentioned Domino’s Pizza, Inc. (NYSE: DPZ) and discussed its stance on the firm. Domino’s Pizza, Inc. is an Ann Arbor, Michigan-based restaurant company with a $14.5 billion market capitalization. DPZ delivered a -28.65% return since the beginning of the year, while its 12-month returns are up by 21.83%. The stock closed at $402.67 per share on March 03, 2022.
Here is what LRT Capital Management has to say about Domino’s Pizza, Inc. in its Q4 2021 investor letter:
“Domino’s Pizza is the world’s largest franchisor of pizza restaurants with over 13,800 locations in 85 countries. As for any restaurant operator, the key metric to consider for Domino’s Pizza is same-store-sales (SSS) growth. Growing same-store-sales are ultimately how a restaurant business increases earnings from its existing assets. The company continues to impress in this criterion with SSS having grown in the U.S. for 40 consecutive quarters, and an astounding 109 straight quarters internationally.
Two-thirds of the company’s stores are currently abroad, and the international segment remains the company’s largest growth opportunity, as the penetration of convenient fast food remains lower abroad than in the United States. Pizza is a product with exceptionally high gross margins, one that “translates” well across different cultures, and one that literally “travels well”, not losing much of its appeal when delivered in a cardboard box. The rise of 3rd party delivery platforms such as Uber Eats, Doordash and Grubhub is challenging the pizza category as it has expanded the number of choices consumers have for convenient takeout. However, the economics of food delivery remain challenging for most restaurants and platforms alike, while pizza delivery continues to be highly profitable. Regardless of how the “delivery wars” currently playing out end, Domino’s financial results show little impact of this increased competition, and the company continues to deliver exceptional financial performance.
Domino’s Pizza stock is not optically cheap based on forward earnings, however, the company has routinely reported earnings growth of over 20% in almost all quarters since 2009. Given the company’s high growth rate, international growth opportunities, and capital light business model, which allows for returns on invested capital of over 40%, we are happy to continue to hold the shares.”
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Our calculations show that Domino’s Pizza, Inc. (NYSE: DPZ) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. DPZ was in 31 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 36 funds in the previous quarter. Domino’s Pizza, Inc. (NYSE: DPZ) delivered a -23.30% return in the past 3 months.
In February 2022, we also shared another hedge fund’s views on DPZ in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
