LRT Capital Management, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. A return of -7.37% was recorded by the LRT Economic Moat strategy for the first quarter of 2022, resulting in a 12-month return of +16.72%. In the LRT Economic Moat strategy, as of April 1st, 2022, the fund’s net exposure was approximately 99% and its estimated net beta-adjusted exposure was 62.2%. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, LRT Capital Management mentioned Domino’s Pizza, Inc. (NYSE:DPZ) and explained its insights for the company. Founded in 1960, Domino’s Pizza, Inc. (NYSE:DPZ) is an Ann Arbor, Michigan-based multinational pizza restaurant chain with a $12.1 billion market capitalization. Domino’s Pizza, Inc. (NYSE:DPZ) delivered a -40.11% return since the beginning of the year, while its 12-month returns are down by -22.05%. The stock closed at $338.00 per share on April 29, 2022.
Here is what LRT Capital Management has to say about Domino’s Pizza, Inc. (NYSE:DPZ) in its Q1 2022 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 alike57, 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.”
Our calculations show that Domino’s Pizza, Inc. (NYSE:DPZ) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Domino’s Pizza, Inc. (NYSE: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 -25.66% return in the past 3 months.
In March 2022, we also shared another hedge fund’s views on Domino’s Pizza, Inc. (NYSE:DPZ) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
